The current worldwide financial collapse has obviously benefited Barack Obama’s Presidential campaign; in fact, it will probably impel him to victory in a few weeks. But the bottom dropping out of the stock market does create a problem for Obama in the realm of tax policy.
The Democratic Party still dominates among low-income voters, but it is now mostly the party of the rich and the professional classes. The Democrats’ indifference to blue collar voters (except during even-numbered Novembers) is obvious from the party’s policies on immigration and energy. Obama, in particular, is the candidate of well-off liberals.
But those Obama supporters aren’t so well-off anymore. This inevitably will make them more sensitive to Obama’s redistributionist tax policies.
The Tax Prof computes that the top marginal federal tax rate under Obama’s tax plan will be 50%, and under McCain’s, 40%. If you live in a state with an income tax and are a high income earner, most of your money will be going to taxes under an Obama administration.
My guess is that Obama supporters who have just seen their net worth decline by 30% or 40% won’t be very interested in paying over half their incomes in taxes for the next four years. That would make it more difficult, and likely impossible, to rebuild the wealth that they have lost in the current collapse.
It’s impossible to say how many Obama supporters will switch to McCain to avoid the tax burden that Obama promises, but one thing we can say for sure is that if Obama wins, there will be a lot of pressure on him from prosperous Democrats–his base–to renege on his promise to increase taxes on “the rich.”
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