Mitt Romney has proposed a tax plan that makes little sense, pleases the rich, and confuses everybody else. Barack Obama has proposed a tax plan that is straight forward and polls extremely well. But there's one way Romney can beat Obama on taxes. It's a plan that would completely shock the Obama campaign, appeal directly to middle class families, and lower taxes on every man and woman with a paycheck.
Mitt Romney should loudly support the extension of the payroll tax cut.
Next year, payroll taxes are projected to return to normal rates. For the typical middle class family, this would feel like a tax hike worth more than $1,000. That is a huge deal in a weak economy with practically no real wage growth among the bottom 50%. In fact, Goldman Sachs projects that the payroll tax hike would be severe enough to wipe out the estimated boost of Bernanke's latest round of stimulus, QE3.
So why isn't Obama talking about it? Why aren't Republicans fighting for it? Why has Tim Geithner said "I don't see any reason to consider supporting its extension"? Why is there "universal acceptance" that payroll taxes will go back to normal when this would represent a $130 billion hit to the economy -- almost as much as the Bush tax cut for lower-income families and more that the impact of budget sequestration and the expiration of unemployment insurance (UI) combined? Well, payroll taxes pay directly into Social Security and lawmakers feel nervous about depleting that coffer.
There is a big screaming vacuum of support for a payroll tax extension, which would help all Americans -- but especially those working and making less than $100,000. Romney could fill the vacuum and tie it to the president's lack of leadership:
This move would be smart economics and savvy politics. It would surprise everybody, especially Democrats. It would break from the Republican party in Congress, which lacks support among independents. It would please economists, cable-news talking heads, and (potentially) the market, since all are concerned about a retrenching in early 2013. It would put the Obama campaign on the defensive (should they fight for the extension and risk seeming like followers, or fight against the extension and look like taxers?). It would give Romney a specific tax plan he could actually defend. It would cast him as a leader, a middle-class defender, and a radical pragmatist.
Would it seem sudden? Even flip-floppy? Maybe. But the media loves an October surprise. And people don't care about flip-flops when you're flopping toward a position they like.
After four years of failed policies, high unemployment, and practically no real wage growth, this president is prepared to let taxes rise on every working family in America. He won't fight for you. I will. That's why, no matter what happens during the lame duck session in December, I will make it my first priority to give every family tax relief for another year by renewing a payroll tax cut.