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The Retrovirus of Upper-Income Tax Cuts

Pete Spiliakos has a smart post pushing back against the idea that Republicans embrace upper-income tax cuts as a sop to rich donors. He looks at the primary campaigns of Tim Pawlenty, Ron Paul, Rick Santorum, Rick Perry, Newt Gingrich, Herman Cain, and Mitt Romney and finds a consistent, if not universal, pattern in the […]

Pete Spiliakos has a smart post pushing back against the idea that Republicans embrace upper-income tax cuts as a sop to rich donors. He looks at the primary campaigns of Tim Pawlenty, Ron Paul, Rick Santorum, Rick Perry, Newt Gingrich, Herman Cain, and Mitt Romney and finds a consistent, if not universal, pattern in the timing and circumstances of each candidate’s tax-cut proposals.

I hope Pete will forgive my quoting him at length, just as I hope you’ll read the whole thing:

Pawlenty came out with his tax cut plan when his campaign was stalled in June of 2011. It is plausible that Pawlenty came out with his plan for high earner tax cuts in order to appeal to Republican donors and improve his fundraising. That is not the only plausible explanation as we will see.

Now let’s look at Rick Perry. Perry came into the race with pretty good fundraising numbers. He was the only Republican to out raise Romney in any quarter. Donors liked him fine. Perry didn’t come out with his tax cut plan until after his poll numbers had collapsed after a series of disastrous debate performances. During the Republican race, Newt Gingrich was never a favorite of donors as a group. Gingrich got money from Sheldon Adelson, but his campaign never raised even half as much as Romney’s in any quarter of the race. The Romney Super PACs were better funded than Gingrich’s. Gingrich came out with his tax cut plan just as he was beginning to recover from his earlier-in-the-year collapse that happened as a result of calling Paul Ryan’s Medicare reform plan “right-wing social engineering.  Perry and Gingrich both unveiled their flat tax proposals in October of 2011 while their campaigns were both polling far behind Herman Cain and Mitt Romney.

Romney is the most interesting case of all. Romney was the clear winner among the donor class both in campaign donations and in outside expenditures. Romney’s original tax cut plan was far more modest than those of Pawlenty, Perry, and Gingrich. Romney proposed to cut the corporate income tax, but the rhetorical heart of Romney’s tax cut was a promise to eliminate taxes on any investment income received by the middle-class. This plan was partly a mirage as the middle-class’s tax liabilities are more likely to be from the payroll taxes than the capital gain or dividend taxes, but it is notable that the candidate with the most donor class support proposed the tax cut that benefited the donor class the least.

Even more interesting was when Romney changed his tax cut plan to include a 20% across-the-board income tax cut. Romney unveiled his 20% across-the-board income tax cut plan on February 22, 2012. That was a couple of weeks after Rick Santorum has swept the contests in Colorado, Minnesota and Missouri. At the time that Romney proposed his expanded tax cut plan, he was running about 5% behind Santorum in the RCP national polling average (not that the national polling average means much as other than a lagging indicator.) It was also a week before the make-or-break primary in Michigan. Romney didn’t need more money from donors. Romney had already carpet bombed Gingrich with ads twice. He was dumping huge negative ad buys on Santorum. Romney needed to reassure Republican primary voters that he was conservative enough.

Spiliakos concludes from this that Republican tax cut proposals are an emblem of “conservative authenticity,” on the order of flag, country, and faith. They’re meant to appeal to ordinary Republican voters, not just the rich ones. He also notes, not incidentally, that each of these proposals eventually failed to persuade voters. It’s not hard to see why. Polls suggest a solid majority favors increasing taxes on the wealthy. What about wealthy Americans themselves? This hardly settles the matter, but, in a recent meeting at the White House, 14 chief executives of big companies like Marriott, Comcast, and Caterpillar signaled their acceptance of higher tax rates as part of a fiscal-cliff deal.

So why do Republicans keep proposing upper-income tax cuts — and, to judge from the unhappy experience of the Romney campaign, tying themselves in arithmetical knots? “Force of habit,” suggests Spiliakos:

When Republican consultants saw that their candidate was in a hole, their instinct was to dig out by offering some (usually radicalized) version of either the Reagan or the Steve Forbes tax plans. It wasn’t the only part of the 2012 Republican consultant playbook that turned out to be out of date.

Upper-income tax cuts have become a kind of vestigial organ of Republican economic philosophy. Only that’s not quite right: vestigial organs are harmless. As manifested in the Romney campaign’s across-the-board tax-cut proposal, they’re more like a retrovirus.

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