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1) Obama knows the budget math doesnt work. Put aside todays budget mess. Its gospel among center-left wonks (the kind of folks who give Obama economic advice) that structural government spending as a percentage of GDP is headed sharply higher over the long term because of entitlements and theres little that can be done about it. The ratio has been around 20 percent or so the past few decades, and number crunchers forecast a sharp rise to 25 percent (best case scenario) to 30 percent (worst case) of GDP over the next few decades. Tax revenues typically hover around 18 percent of GDP. That gap representing $500 billion to $1 trillion a year will need to be closed or else cause economic chaos. The possible answers: a) less spending, b) higher tax revenues from higher growth, or c) higher tax revenues from higher rates on the non-wealthy. Oh, and the wonks are convinced a is a political impossibility and b an economic one. Theyre wrong, but thats what they think.
[See if Obama's big economic gamble is paying off]
2) Obama seems to prefer tax hikes to spending cuts. Reduced future healthcare spending needs to be a huge part of the budget solution, and ObamaCare doesnt make the grade at this point. Right now the various Obamacrat plans actually make things worse by failing to bend the curve. Whats more, Obama has proposed nothing as president to make Social Security solvent. And during the campaign, his preferred fix was higher payroll taxes rather than commonsense measures like extending the retirement age or changing how benefits are calculated. Of course, Obama has also proposed raising income, investment, corporate and energy taxes. Cut spending or raise taxes for Obama its an easy pick, unfortunately.
3) Obama has already tried raising taxes. Lets, for the sake of argument, ignore the increased federal cigarette tax that would certainly seem to be a violation of Obamas tax pledge. Call it a misdemeanor offense. But what about his cap-and-trade proposal, a de facto energy tax on everyone? Before the plan was modified in the House, the White House expected the plan to bring in some $80 billion a year from 2012 to 2019 by auctioning off carbon emission permits (probably to pay for healthcare reform). And making energy more costly is as about as broad-based a tax as you can get.
[Find out how healthcare taxes would affect you]
4) Obamas advisers are for higher taxes. Lets review, for example, what White House economic adviser and guru Larry Summers said on Sunday about tax hikes: There is a lot that can happen over time. It is never a good idea to absolutely rule things out no matter what. Indeed, Summers wont rule it out because he thinks all the Bush tax cuts need to go, not just the ones for so-called rich folks. Here is Summers from earlier this year on Meet the Press when he put no qualifiers on letting the Bush tax cuts expire at the end of 2010: I dont think theres any question they have to be repealed. The country cant afford them for the long run. They cant be, they cant be part of the long-run budget picture. Not for anyone, it seems.
5) Obama doesnt seem to think high taxes are harmful. Think about this: Not only was the top income tax rate a stratospheric 70 percent when President Reagan took office in1981, the tax code was not indexed to inflation. A lethal combo for economic growth. But heres what Obama wrote about the Reagan tax cuts in The Audacity of Hope: The high marginal tax rates that existed when Reagan took office may not have curbed incentives to work or invest, but they did distort investment decisions and did lead to the wasteful industry of setting up tax shelters. Thats it! Heavens, if Obama doesnt think the pre-Reagan tax code wasnt a disincentive to working, saving and investing, is there any tax system that he would find anti-growth?
Bottom line: The belief in the need for higher, European-style taxes (like a VAT) fills the policy cloud that surrounds Obama. Its hard to overstate this. Its right up there with global warming. Obama knows he faces a looming fiscal crisis and higher taxes will be his weapon of choice. To paraphrase Mondale, Obama will raise middle-class taxes. He wont tell you (yet). I just did.
James Pethokoukis » Blog Archive » 5 reasons why Obama will hike middle-class taxes | Blogs |
[See if Obama's big economic gamble is paying off]
2) Obama seems to prefer tax hikes to spending cuts. Reduced future healthcare spending needs to be a huge part of the budget solution, and ObamaCare doesnt make the grade at this point. Right now the various Obamacrat plans actually make things worse by failing to bend the curve. Whats more, Obama has proposed nothing as president to make Social Security solvent. And during the campaign, his preferred fix was higher payroll taxes rather than commonsense measures like extending the retirement age or changing how benefits are calculated. Of course, Obama has also proposed raising income, investment, corporate and energy taxes. Cut spending or raise taxes for Obama its an easy pick, unfortunately.
3) Obama has already tried raising taxes. Lets, for the sake of argument, ignore the increased federal cigarette tax that would certainly seem to be a violation of Obamas tax pledge. Call it a misdemeanor offense. But what about his cap-and-trade proposal, a de facto energy tax on everyone? Before the plan was modified in the House, the White House expected the plan to bring in some $80 billion a year from 2012 to 2019 by auctioning off carbon emission permits (probably to pay for healthcare reform). And making energy more costly is as about as broad-based a tax as you can get.
[Find out how healthcare taxes would affect you]
4) Obamas advisers are for higher taxes. Lets review, for example, what White House economic adviser and guru Larry Summers said on Sunday about tax hikes: There is a lot that can happen over time. It is never a good idea to absolutely rule things out no matter what. Indeed, Summers wont rule it out because he thinks all the Bush tax cuts need to go, not just the ones for so-called rich folks. Here is Summers from earlier this year on Meet the Press when he put no qualifiers on letting the Bush tax cuts expire at the end of 2010: I dont think theres any question they have to be repealed. The country cant afford them for the long run. They cant be, they cant be part of the long-run budget picture. Not for anyone, it seems.
5) Obama doesnt seem to think high taxes are harmful. Think about this: Not only was the top income tax rate a stratospheric 70 percent when President Reagan took office in1981, the tax code was not indexed to inflation. A lethal combo for economic growth. But heres what Obama wrote about the Reagan tax cuts in The Audacity of Hope: The high marginal tax rates that existed when Reagan took office may not have curbed incentives to work or invest, but they did distort investment decisions and did lead to the wasteful industry of setting up tax shelters. Thats it! Heavens, if Obama doesnt think the pre-Reagan tax code wasnt a disincentive to working, saving and investing, is there any tax system that he would find anti-growth?
Bottom line: The belief in the need for higher, European-style taxes (like a VAT) fills the policy cloud that surrounds Obama. Its hard to overstate this. Its right up there with global warming. Obama knows he faces a looming fiscal crisis and higher taxes will be his weapon of choice. To paraphrase Mondale, Obama will raise middle-class taxes. He wont tell you (yet). I just did.
James Pethokoukis » Blog Archive » 5 reasons why Obama will hike middle-class taxes | Blogs |
