Obama-Clinton protect middle class below $400k, taxing the fiscal cliff
For liberals seeking progressivity and fairness, that should be the easiest possible concession to make. The $400,000 threshold still puts the top bracket close to where it was under Bill Clinton when you adjust for inflation, and that Clintonian definition of "rich" wasn't an implausible one: While the whining of the upper upper middle class (or, if you prefer, the not-that-rich rich) can be unseemly, there really is a big difference between a taxpayer making six figures annually and a taxpayer making seven or eight, and setting the top rate in the mid rather than low six figures is a way of acknowledging that the near-rich and super-rich do not occupy the same financial universe.
And here I think liberals have a real reason to be discouraged by the White House's willingness -- and, more importantly, many Senate Democrats' apparent eagerness -- to compromise on tax increases for the near-rich. Liberal pundits seem most worried about what this concession signals for the next round of negotiations, over the sequester and the debt ceiling. But if I were them I'd be more worried about the longer term, and what it signals about their party's willingness and ability to raise tax rates for anyone who isn't super-rich. As I've suggested before, these negotiations amounted to a test of liberalism's ability to raise revenue, and it isn't clear that this outcome constitutes a passing grade: If a newly re-elected Democratic president can't muster the political will and capital required to do something as straightforward and relatively popular as raising taxes on the tiny fraction Americans making over $250,000 when those same taxes are scheduled to go up already, then how can Democrats ever expect to push taxes upward to levels that would make our existing public progams sustainable for the long run?
Alas, many of the revenue-enhancing tax reform proposals that have been bruited about would probably raise taxes significantly on earners in the $100,000-$400,000 range, which means that exempting the near-rich this time around doesn't mean that they won't end up paying more down the road. (And, in fact, it looks like the proposed deal will include a de facto down payment on such a reform, by reinstituting a phaseout on exemptions for households making over $250,000.)
Alas for liberals, the tax debate isn't that simple, because it's taking place in the context of immense projected future deficits and a welfare state that seems unsustainable without substantial increases in revenue. Given these realities, fairness and progressivity are necessarily less important to liberalism over the long run than simple dollar figures, and the American left actually has a long-run incentive to make the federal tax code less progressive, because only a broader base can keep the liberal edifice solvent in the long run.