Is Obamas Tax Plan An Attack On His Own Base?

Part of Obama’s economic plan is to raise taxes on people who make more than $200,000 a year.  But as Paul Toscano points out, Obama did very well in places where high-income people live:  in fact, he won 13 out of the 14 states with the highest concentrations of households earning over $200,000.  (“Earnings” is not the same as “income,” but presumably it’s close enough for the purpose of ranking states.)  This is consistent with the pattern, noticed by many since the 2000 election, that Democrats win in the rich northeastern and west coast states while Republicans do better in the poorer states in the south and middle of the country.

At first this seems like a delicious paradox–liberal Democrat wins on the basis of his vote in the rich states, then turns around and slaps a tax increase on them.  But when phased this way, it moves beyond paradoxical to be an actual puzzle.  A liberal Democrat making noises about redistribution but then rewarding his affluent contributors–that we could all understand.  But if the Democrats are strongest in the rich states, what are they thinking when they propose raising taxes on the rich??  Why would Obama alienate his strongest supporters?

I have three answers.

First, the over-200,000’s are a small percentage of the population–even in Connecticut, the richest state, they are only 8% of households, and going down to Minnesota, the fifteenth-richest state by this measure, they are less than 4%.  If you need to raise revenue while alienating the minimum number of people, the rich are the ones to tax.  Beyond this, the current economic crisis has at least temporarily reduced the strengths of the usual political and economic arguments against tax hikes.

Second, income is not the same as economic ideology.  Yes, on average, richer Americans tend to hold more conservative positions on economic issues, but the correlation is not strong.  Obama’s supporters among the rich are, by and large, those rich people who are more comfortable with the idea of a graduated income tax and high government spending.

Third, although Obama and the Democrats dominated in the rich states, richer voters actually split close to 50/50 between the two parties.  The best data we have on this, the Pew pre-election polls, show McCain slightly winning voters with incomes over $150,000.  (Our other source of data are exit polls, which showed Obama winning the over-200,000’s by a narrow margin.  In either case, it’s close to an even split.)  Here’s the picture:

When we look at voters within states, we find that Obama won among all income groups in rich states such as New York and Connecticut, while, in the poorer states where McCain ran more strongly, he did particularly well among the upper middle class and rich.  Here’s a quick summary:

You can see my blog for further details and more graphs.

The bottom line is that, yes, there are a bunch of rich Democratic voters in New York, Connecticut, etc. who may have gotten a little more populism from Obama than they bargained for–and it will be interesting to see how influential legislators such as Chuck Schumer react to the tax plan–but, overall, there’s no reason to think that Obama isn’t giving his supporters what they want in terms of tax policy.  It all makes perfect sense politically.  Whether it works economically is another question, and one that is beyond my expertise.