from November 23, 2007
by Donald Lambro
Democrats party of rich, study finds
Democrats like to define themselves as the party of poor and middle-income Americans, but a new study says they now represent the majority of the nation’s wealthiest congressional districts.
In a state-by-state, district-by-district comparison of wealth concentrations based on Internal Revenue Service income data, Michael Franc, vice president of government relations at the Heritage Foundation, found that the majority of the nation’s wealthiest congressional jurisdictions were represented by Democrats.
He also found that more than half of the wealthiest households were concentrated in the 18 states where Democrats hold both Senate seats.
“If you take the wealthiest one-third of the 435 congressional districts, we found that the Democrats represent about 58 percent of those jurisdictions,” Mr. Franc said.
A key measure of each district’s wealth was the number of single-filer taxpayers earning more than $100,000 a year and married couples filing jointly who earn more than $200,000 annually, he said.
But in a broader measurement, the study also showed that of the 167 House districts where the median annual income was higher than the national median of $48,201, a slight majority, 84 districts, were represented by Democrats. Median means that half of all income earners make more than that level and half make less.
Mr. Franc’s study also showed that contrary to the Democrats’ tendency to define Republicans as the party of the rich, “the vast majority of unabashed conservative House members hail from profoundly middle-income districts.”
“I just found the pattern across the board to be very interesting. That pattern shows the likelihood of electing a Democrat to the House is very closely correlated with how many wealthy households are in that district,” Mr. Franc said in an interview with The Washington Times.
“A fair number of these districts are represented by freshmen, a lot of the guys who got elected in 2006,” he said.
“The demographic reality is that the Democratic Party is the new ‘party of the rich.’ More and more Democrats represent areas with a high concentration of wealthy households,” he wrote on Nov. 5 in the Financial Times of London, in a preview of his study.
In addition, the current Senate tax debate provides an example of how the Democrats’ rich constituents are influencing their agenda and have divided House and Senate Democrats.
In the House, for example, Democrats have made elimination of the alternative minimum tax, known as the AMT, the centerpiece of a sweeping tax-revision plan crafted by Rep. Charles B. Rangel of New York, the chairman of the House Ways and Means Committee. The AMT law was passed by the Democratic Congress in 1969 to make sure that wealthy taxpayers — some of whom were able to use tax breaks to avoid paying anything — paid at least some taxes.
Over the years, as many middle-class incomes rose, people were increasingly being pushed into higher tax brackets once reserved for only the richest Americans. The largest portion of these taxpayers live predominantly in Northeastern “blue” states dominated by Democrats, who, inundated by constituent complaints, soon began joining their Republican counterparts in pushing to eliminate the AMT.
But the strongest manifestation of the influence that the Democrats’ wealthiest constituencies are wielding over party policy came earlier this month as Democratic leaders were considering a proposal to offset revenue losses from AMT repeal by raising taxes on hedge-fund managers, many of whom are major contributors to the Democratic Party.
A “stopgap” bill authored by Mr. Rangel to tax hedge-fund compensation at 35 percent as regular income rather than the current 15 percent capital-gains rate, which passed the House Nov. 9, appears to be going nowhere with Senate Democrats.
Sen. Charles E. Schumer of New York, the chairman of the Democratic Senatorial Campaign Committee, which has raised tens of millions of dollars from Wall Street financiers and hedge-fund managers, opposes Mr. Rangel’s plan. Earlier this month, Sen. Max Baucus of Montana, the chairman of the tax-writing Finance Committee, said the tax increase was a bad idea and could not pass the Senate.
Rep. Rahm Emanuel of Illinois, the House Democratic Caucus chairman, also has said he wants a stand-alone fix for the AMT without an offsetting tax increase, fearing that any vote to raise taxes now will hurt vulnerable Democrats in next year’s elections. More moderate Blue Dog Democrats in the House have also been among the critics of the tax increase.
Some Democrats acknowledge that moneyed interests are exerting a strong influence on their party’s agenda and legislation.
“The fact is that [the Democratic campaign committees] have had large contributions from these hedge-fund folks,” said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal think tank.
“As far as the hedge funds and tax breaks go, the Democrats are clearly getting a lot of money from people who are affected by that, and they’re responding,” Mr. Baker said.
Mr. Franc thinks this turnabout by Democrats, whose campaign mantra has long been to tax the rich more, is only the beginning.
“Increasingly, we will see Democrats responding to the economic demands of this particular upper-income constituency,” he said.
“What the data suggests is that there will be a natural limit to how far and how much the Democrats can sock it to the rich, because in doing so, it means they will have to sock it to their own constituents,” Mr. Franc said.
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Note: The above article is no longer available on the Washington Times where it was first published but a similar one appeared here at Town Hall on November 29, 2007.
WASHINGTON — Perhaps the biggest shift in American politics is the growing affluence of the Democrats’ congressional constituencies and the influence they wield over party tax policy.
While Democrats like to portray themselves as the champions of middle- and lower-income Americans, a new study finds that they now represent a majority of the country’s wealthiest districts and their richest voters are the ones they are listening to when it comes to tax reform.
In a little-noticed, district-by-district study of incomes, based on Internal Revenue Service and U.S. Census Bureau data, the Heritage Foundation not only found a majority of the nation’s richest districts were represented by Democrats but more than half of the wealthiest households were concentrated in the 18 states where Democrats hold both Senate seats.
“If you take the wealthiest one-third of the 435 congressional districts, we found that Democrats represent about 58 percent of those jurisdictions,” said Heritage vice president Michael Franc, who directed the study.
The flip side of this political equation is equally surprising. Franc’s study found that, contrary to the Democrats’ propensity to define Republicans as the party of the rich, “the vast majority of unabashed conservative House members hail from profoundly middle-income districts,” he said.
But a deeper examination of his findings reveals how these well-heeled Democratic constituencies are using both their affluence and influence to change tax policies that would cut into their wealth. And key Democrats are only too happy to accommodate them.
“What the data suggests is that there will be a natural limit to how far and how much the Democrats can sock it to the rich, because in doing so it means they will have to sock it to their own constituents,” Franc said.
“Increasingly, we will see Democrats responding to the economic demands of this particular upper-income constituency,” he said.
We have already seen their influence in the Democrats’ turnaround on the alternative minimum tax (AMT) that they enacted in 1969 to prevent wealthier taxpayers who used available tax breaks to avoid paying taxes on their income.
What happened is that, as middle-class incomes rose, people found they were being shoved into higher brackets that socked them with the AMT. The largest share of these taxpayers live in overwhelmingly Democratic “blue” states of the Northeast, Midwest and the West Coast.
It wasn’t long before liberal Democrats in these areas, such as New York Sens. Hillary Clinton and Charles Schumer, were joining Republicans in pushing to eliminate the AMT.
A “stop gap” bill to prevent millions of taxpayers from being hit by the AMT next year, authored by New York Rep. Charlie Rangel, the chairman of the powerful tax-writing Ways and Means Committee, passed the House this month.
But the influence of the Democrats’ rich friends was just beginning to be felt. To offset the revenue losses from AMT’s repeal, Rangel’s bill proposed raising taxes on Wall Street financiers and hedge-fund titans, many of whom are major contributors to the Democratic Party.
Rangel’s bill would tax hedge-fund compensation as regular income at the 35 percent top rate, instead of the current 15 percent capital-gains rate paid now.
That’s when powerful, well-funded lobbyists, bankrolled by hedge-fund managers, went to work. It wasn’t long before Schumer, the Democratic Senatorial Campaign Committee chairman who has raised millions from these same financial managers, came out against Rangel’s soak-the-rich, anti-investor bill.
Democratic Sen. Max Baucus of Montana, the Senate Finance Committee chairman who said the tax hike was a bad idea and would never pass in the Senate, followed Schumer.
Other Democrats are squirming over the tax-the-rich scheme as well. Rep. Rahm Emanuel of Illinois, the House Democratic Caucus chairman, wants a stand-alone fix for the AMT without a tax-hike offset, worrying that it could hurt Democrats in November. Some Democratic Blue Dogs have criticized the tax-hike offset, too.
Democratic analysts readily acknowledge what’s going on here. “As far as the hedge funds and tax breaks go, the Democrats are clearly getting a lot of money from people who are affected by that, and they’re responding,” said Dean Baker, co-director of the liberal Center for Economic and Policy Research.
This is a story with profound political implications for Democrats who will have a hard time bashing Republicans next year as the party of the rich once the story gets out that they are protecting immensely wealthy hedge-fund managers from the IRS.
“The demographic reality is that the Democratic Party is the new party of the rich,” Franc says.
Is this the kind of man-bites-dog story that we are likely to see reported on the nightly news shows? Don’t hold your breath.
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See related article about the Party of the Rich in NH.