Has Obama been given a mandate to raise taxes on the wealthy?

November 7, 2012

Does Obama's win last night mean tax hikes for the rich are on their way?

That's what leading Democrats and liberal supporters of the president are saying this morning: The president and victorious congressional Democrats campaigned heavily on raising taxes on the wealthy, and voters approved of that message, so Democrats should strengthen their push to let the Bush cuts for upper-income households expire, they say.  


Carolyn Kaster/AP

"What has changed in Washington is that the momentum on the Hill is shifting to Democrats," says Damon Silvers, policy director for the AFL-CIO. "Yesterday's results reinforced the president's message that he is not going to extend the tax cuts on the upper-income households."

Jared Bernstein, former economic adviser to Vice President Biden, similarly believes that Obama's victory sent Washington a message on higher taxes. "The President was forthright about rates having to go up on upper-income households in order to move towards a sustainable budget path…and he won," he wrote on Wednesday. Majority Leader Harry Reid, who picked up two seats in the Senate last night, is likewise laying claim to a mandate to raise taxes on the wealthy on the Hill today, though he declined to "draw lines in the sand."

Not so fast, says the business community. On a conference call Wednesday morning, leading industry lobbyists said that the president's mandate was to demonstrate leadership by being willing to work with the opposition, rather than draw a line in the sand on Bush tax cuts for the wealthy. 

"That mandate is to come together to solve these problems," said Greg Casey, president of the Business Industry Political Action Committee, who was joined on the call by the Business Roundtable and National Association of Manufacturers. "I'm hoping that in these four or five days, we don't rush out to so narrowly define our mandate that we don't create opportunity for everyone to come together."

Former GOP Sen. John Engler, president of the Business Roundtable, similarly urged the president to rise above the fray by reaching out to Republicans in the manner that Bill Clinton did with then-Speaker Newt Gingrich, bringing in staffers "who can talk across the partisan divide and philosophical divide."

What kind of deal would come out of such leadership from the president? A plan that prioritized economic growth and jobs, not raising taxes, the business groups said. "The great thing about winning a mandate is you get to go first. That's called leadership. I'd simply go for the idea of full one-year extension in 2013," said Engler, arguing that any major changes to the tax code should be done as a part of a bigger "grand bargain" further down the road. "There are pretty convincing economic reasons not to raise taxes" in the short-term, he added.

"Now is a time to govern. When you look at raising taxes on those over $250,000 or $1 million—clearly a tax increase on that group isn't going to solve either the fiscal cliff or the long-term deficit," added Casey. "What the American people want—it would be nice if there would be a ceasefire here."

When asked whether they thought Republicans should be willing to make bigger concessions on taxes—given the election results and the need to come to a deal on the fiscal cliff—Engler said that they would have to be willing to engage with Democrats on the issue. "You do have to respond. You can't sit back and say, 'It's my way or the highway.' That's not the way it works," he said.

But it's unclear how much pressure the business community will put on Republicans should the GOP continue its firm opposition to any tax increases. Both the Business Roundtable and NAM are members of the Tax Relief Coalition, which has warned Congress against a deal that depends on significant new tax revenue. And their warnings  to Obama on higher taxes for the wealthy could give congressional Republicans more cover for holding their ground.

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Dylan Matthews | November 7, 2012