Ramesh notes below how the Obama administration’s decision to back off on taxing earnings of college-savings plans shows how hard liberals are finding it to raise middle-class taxes, which they need to do to pay for the welfare state they want. (Peter Suderman makes this point too.)

But the problem can be sliced a little more finely: Liberals probably need to raise taxes on the middle class and the upper middle class, and they have a hard time doing either. The Obama administration’s 529 plan was mostly a tax increase on the upper-middle-class — those earning, say, between $200,000 and $1 million a year. A lot of people of modest incomes have 529s, but they don’t put very much in them and they don’t get very much out of shielding income from taxation. Seventy percent of the tax benefits from 529s goes to Americans earning over $200,000 a year. I don’t begrudge them their savings, but it’s a fairly narrowly construed tax preference for a fairly narrow group. (So narrowly construed, in fact, that ending the tax break raises quite a small amount of revenue.)

A catchier term for the upper middle class, to which Reihan introduced me, is HENRYs — high earners, not rich yet. Members of this class, especially those in costly coastal states and cities, are a crucial part of the Obama/Democratic coalition, so presumably the president isn’t eager to raise taxes on them. But he has tried doing so, a number of times, presumably because he needs the revenue. The fiscal-cliff deal Ramesh mentions raised taxes on a slice of them; most of the 529 revenue would have come from them; and the Obama administration has floated and then abandoned a number of other proposals to raise their taxes, like limiting the value of the mortgage-interest tax deduction.

Since most of those were either watered down (the fiscal-cliff deal) or never happened, this goes to illustrate just how difficult Democrats’ bind is: Of course it’s hard to raise taxes on the middle class, but it’s also pretty hard to raise taxes on the upper middle class. This problem also affects Republicans, who would like to reduce some of these upper-middle-class tax breaks to pay for a simpler and more middle-class-friendly tax code, but not in nearly as meaningful a way.