White House betting ’14 midterm elections on economic patriotism

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The White House is seeking to amp up the Democratic base this fall by criticizing corporations for abandoning the United States to lower their tax bill. 

It’s a return to economic populism months for a White House that has repeatedly flirted with the theme, but sometimes been distracted by other pressing domestic and international affairs.

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Democrats believe the issue could help their party hold on to its majority in the Senate, which Republicans are hoping to take over.

“Let’s rally around an economic patriotism that says, instead of giving more tax breaks to millionaires, let’s give tax breaks to working families to help pay for child care or college,” the president said during a speech in Texas last month. “Instead of protecting tax loopholes that let corporations keep their profits overseas, let’s put some of that money to work right here in the United States rebuilding America.”

Democrats see the tax issue as a political winner that allows President Obama to side with middle class taxpayers and against corporate executives who can be painted as disloyal and unpatriotic. They think it will be difficult for Republicans to defend the practice.

“There is still a great amount of discomfort in the American electorate around the economy and particularly anger with Wall Street and corporate chiefdoms who seem to be getting a better deal than everybody else,” said Democratic strategist Jamal Simmons. “Any time the White House can channel that into policy actions, that's good.”

The White House has been trying to turn what could be an arcane political issue into a story right and wrong.

Obama never uses the term “inversion,” which refers to the practice in which a corporation moves its headquarters overseas. Corporations can lower their tax bills by moving their headquarters to a country with a lower corporate tax rate, even if their operations largely stay in the United States.

Instead, the president simply calls it a “loophole,” which better fits the populist theme.

“Nobody knows what the hell you're talking about when you use the phrase tax inversion, but they do know what’s going on when someone who is an American company decides they no longer are an American company for tax purposes,” Democratic strategist Peter Fenn said.

Obama later this summer is expected to announce steps the Treasure Department will take to pressure corporations against inverting, while reiterating calls for Congress to take action.

Polling suggests the issue could be good for the White House.

A poll commissioned by the Americans for Tax Fairness found that half of all voters were aware of the issue, and that large majorities — including 86 percent of Democrats, 80 percent of independents and 69 percent of Republicans — disapprove of it.

“Tax fairness stuff polls really well across the board,” said ATF executive director Frank Clemente. 

He said voters are “very sensitive to offshoring of profits and offshoring of jobs, and this inversion stuff feeds very much into that.”

His polling leaves him “extremely” confident it will resonate with independent voters.

The White House also wants to talk about the economy amid signs of economic growth.

Before Democratic lawmakers left Washington for recess, the White House sent them a report touting a string of positive economic indicators, including six consecutive months in which the economy has added at least 200,000 jobs.

Obama wants to celebrate the recent gains, and portray corporations and Republicans as threatening it. The White House says inversions could cost the Treasury $20 billion over the next decade, putting a higher tax burden on everyone else.

One Democratic strategist says the White House would be foolish to pin their hopes exclusively on the issue.

“I’m kind of skeptical — I’m not sure the public even knows what an incursion is, and the amount of time it would take to educate the public on it — I’m not sure we have that time,” the strategist said. “If you’re trying to turn out and persuade voters in the battleground states and districts that we’re fighting in, is focusing on an obscure tax provision the right way?”

Other Democrats agreed that the inversion strategy will only work if built into a larger narrative.

“One issue does not a narrative make,” Simmons said. “It's not the individual issues that pop up that will give voters a compelling reason to go out and vote, it's the overall arch. What makes me nervous is this conversation is beginning in August — not in April or March. Usually the best campaigns lay down their predicate arguments much earlier.”

The key, Fenn says, “getting beyond the esoteric,” and parlaying the expected executive action into a broader dialogue on tax reform or the economy.

“The best approach for Democrats is the one we always win on, which is, ‘Hey, who's fighting for middle class folks? Who's battling to make sure you can send you kids to college and that everybody's paying their fair share?” Fenn said. “I think there’s a way to talk in terms of growth and improving the economic climate so more jobs are created, and more high-paying jobs.”