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Why Republicans Are Winning on the Tax Issue

April 14, 2010

Today's last-minute trip to the post office to mail in your return is a reminder of one of life's unpleasant realities: paying taxes. Always important in politics, the tax issue is likely to play a larger role this year than in any midterm election since 1994.

A recent Rasmussen survey reported that 66% of Americans believe the nation is over-taxed. There's a reason. Under President Barack Obama taxes are going up—a lot.

House Ways and Means Committee Republicans have issued a summary of the 25 tax increases signed into law by Mr. Obama so far. They total $670 billion over the next 10 years, including 14 tax hikes (including an annual tax on every insurance policy and an annual tax on brand-name drugs) that break Mr. Obama's solemn 2008 campaign pledge never to raise taxes on families making less than $250,000 a year.

Many of these taxes are part of the ObamaCare monstrosity. New levies on investment, drugs, medical devices and insurance policies eventually will hit ordinary Americans, and the public knows it. A late March Fox News poll asked, "If major health care reform legislation is passed, do you think your taxes will increase, decrease or stay about the same?" Seventy-five percent think their taxes will increase.

Tax concerns will hurt congressional Democrats. In rural areas, their opposition to repeal of the death tax antagonizes farmers and ranchers. Then there are America's 32 million small-business owners, who feel put upon by the administration's tax everyone-and-everything philosophy.

Families, especially in the suburbs, are pressed by rising property, sales and state income taxes in addition to the federal tax increases. And don't forget the 53 million investors whose battered accounts are only now recovering. There's a new 3.8% surtax on certain kinds of investment income for high earners, but it is not indexed for inflation, so it will bite an increasing number of people over time.

Between the March 2009 CNN poll and the March 2010 Associated Press survey, Mr. Obama's approval rating on taxes dropped to 44% from 62% while his disapproval rating rose to 43% from 37%. Similarly, the Rasmussen poll of March 31-April 1 found 46% of voters believe today their taxes will increase under Mr. Obama, compared to 36% who think they will stay the same and 8% who think they will decrease.

It's somewhat unusual that so many believe themselves over-taxed when half of all Americans don't pay federal income taxes. But many of them shell out for payroll and property taxes, and virtually everyone pays sales taxes. Plenty of Americans understand higher business taxes are eventually paid by those who buy goods and services.

Politicians would be wise to remember that high taxes also are a matter of principle. The Rasmussen poll of March 31-April 1 found three-quarters of Americans believe that no one should pay more than 20% of their income in taxes—a figure we are well beyond. This makes taxation a moral issue as well as an economic one.

The public isn't stupid. They understand, like night follows day, that Mr. Obama's blizzard of spending is generating a much larger national debt, and that debt, in turn, will create enormous pressure to raise taxes.

Mr. Obama will use more spending and bigger deficits as justification for additional taxes—perhaps even a European-style value-added tax (VAT), an idea already floated by House Speaker Nancy Pelosi and Obama economic adviser Paul Volcker. At the heart of Mr. Obama's agenda is the further empowerment of Washington, which Americans will not easily accept.

Jobs remain the No. 1 political issue, understandable when unemployment presses near double digits. Taxation as a stand-alone issue falls way below that according to most polls. But some issues are connected, and I'm convinced that Americans increasingly understand that rising spending and deficits and large tax increases will hurt the nation's ability to create jobs. This will help the GOP and hurt Democrats.

In this week's George Washington University Battleground Poll, for example, congressional Republicans lead their Democratic counterparts on which party is better able to hold down taxes (56% to 28%), control wasteful spending (44% to 32%), and control the deficit (45% to 36%). This puts the GOP within striking distance of catching the Democrats on who can turn the economy around (currently 41% to 47%) and create jobs (38% to 46%)—both issues that Democrats dominated not long ago. Historically, Republicans win—and win big—when they are within six points or less of the Democrats on the economy and jobs.

Things look bleak for Democrats right now. And if Republicans connect the dots among record spending, skyrocketing deficits, rising taxes and a weak recovery, Democrats will suffer a midterm loss from which the Obama presidency may never fully recover.

This article originally appeared on WSJ.com on Wednesday, April 14, 2010.

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