Once again a Democrat's letting the Right set the terms of the debate. This time it's House Minority Leader Nancy Pelosi, who's undercutting her party's tax policy in an odd way: by redefining "middle class" so that it includes people making a million dollars a year.
Pelosi's proposal would be great for millionaires -- and bad for everyone else.
It hurts the nation economically by depriving the government of revenue when it should be providing more stimulus funding. It also muddies her party's messaging, and reinforces the unpatriotic idea that taxes are punishment rather than a fair exchange. Nancy Pelosi is better than this.
How good is her proposal? Let's take a closer look.
The Upper Upper Upper Upper Upper Middle Class
President Obama has proposed ending the Bush tax breaks. That would, among other things, raise the tax rate from 35 percent to 39.6 percent for income above $250,000. But since he's keeping taxes where they are for income below $250,000, that would preserve a tax break for millionaires too!
After all, you can't earn a million dollars unless you earn $250,000 first.
Nevertheless, Minority Leader Pelosi sent a letter to her Republican counterpart, House Speaker John Boehner, demanding an immediate up-or-down vote on a very different proposition: letting the tax cuts expire for income above a million dollars.
To make matters even more confusing, Leader Pelosi described the proposal as an "extension of the middle-class tax cuts." While opinions differ on what constitutes a middle-class income, this appears to be the first time in history that a million-dollar income was characterized as "middle class." The average personal income in the United States as of the last survey was $39,959 and, as Suzy Khimm explains, the more meaningful measurement is the median income, which was $26,363.
In other words, Pelosi's proposal gives its "middle class tax break" to people who make up to 25 to 37 times as much as those in the national "middle," depending on how you calculate it. And its greatest tax advantages go to the 235,000 people, or about 0.1 percent of the people filing tax returns, who earned a million dollars or more per year.
Who Gets the "Middle-Class" Tax Breaks?
We made some rough calculations to estimate the tax breaks that people would receive at different levels if Pelosi's plan were adopted instead of Obama's. Our admittedly crude estimates suggest that person earning $251,000 would receive a $45 benefit using Pelosi's plan rather than the President's.
But a person earning $1,000,000 or more would get a $34,500 tax break under her "middle class millionaire' proposal.
That includes billionaires, who would still get at least $34,500 more in tax breaks under Pelosi's plan than Obama's.
Where Are the Democrats?