Obama Budget Built On Tax Increases For Everyone
Progressives like to talk about “progressive taxes”. It’s code language for screw the rich. That’s precisely what President Obama is proposing in his budget proposal. Now to be clear, none of this is new or a surprise – he said this is what he planned on doing all along. However that doesn’t make it “progressive” or sustainable. His budget proposal includes plans to:
—Raise the top two income tax rates for individuals, from 33 percent and 35 percent, to 36 percent and 39.6 percent, respectively. Unless Congress intervenes, those rates will rise next Jan. 1 when Bush’s tax cuts expire. That government would reap $365 billion over the next decade.
—Limit the itemized tax deductions high earners can claim for charitable donations, mortgage interest and state and local taxes, raising about $210 billion for the next decade.
—Increase the top capital gains tax rate from 15 percent to 20 percent for families making more than $250,000 a year and individuals making more than $200,000. The proposal would raise about $105 billion.
Of course we’re back to the old “static” analysis model here. These numbers hold if none of those effected do anything to protect their earnings and assets (or the market doesn’t research and find loopholes which allow such protection of assets) over the next decade.
So the chance of this revenue stream remaining intact and at the level suggested here is highly unlikely if you know anything about human nature and how markets work. Look at the UK for instance where the same sort of nonsense is happening:
Mike Warburton, senior tax adviser at Grant Thornton, one of Britain’s biggest accounting firms, said that clients were pursuing four main ways to avoid paying half their salary in tax: bumping up this year’s pay; storing up pay in their firm to be drawn down at a later date; leaving the country; or choosing to pay it to charity rather than the taxman.
“People are taking obvious avoidance measures because they are not prepared to pay 50 per cent tax,” Mr Warburton said.
It is unlikely they’ll be any more “prepared” to do so here than there.
Also unlikely are cuts in spending which are really what are needed. Once Congress sees this revenue stream established, even for a year – heck, even hypothetically – they’re likely to spend what is promised in the outlying years and use it in their PAYGO justifications.
Then there’s the aspect of his proposals which use the tax code to punish businesses or encourage them to not do business here at the level at which they are now engaged:
—Change the way profits made by investment fund managers are taxed, raising an additional $24 billion over the next decade.
—Impose a “financial crisis responsibility fee” on large financial institutions, raising $90 billion over the next decade.
—Restrict the ability of international companies to defer taxes on profits made overseas, raising about $26 billion over the next decade.
—Impose a total of about $39 billion in tax increases on oil, gas and coal companies over the next decade.
The tax on oil, gas and coal will simply raise the price at the retail level for all consumers, giving lie to the Obama promise that taxes won’t go up “one dime” for 95% of Americans. Additionally, the tax on the energy companies, passed on to consumers, will affect the poor much more than others. There are other ways to extract that pound of flesh than through income taxes and the administration knows that only too well, whether or not Obama supporters want to admit it or not.
And both he and they will have difficulty making that claim at all if this remains in the budget:
According to a report by The Hill President Barack Obama is seeking to end a middle-class tax break he once said would be permanent.
The $3.8 trillion budget request rolled out by the White House on Monday would renew the Making Work Pay tax credit for fiscal 2011, but then would have it sunset
Yes, that’s right, instead of making that middle class tax cut permanent as he promised, he’s proposing it “sunset” (i.e. go away) after FY 2011 (just before the 2012 election and the tax prep season so it won’t effect voters till after the election).
All in all, taxes would increase $1.1 trillion (again, assuming no person or no business effected does anything to avoid these taxes) over a decade.
Yes, that’s a lot of money – but then we’re running a deficit this year of $1.6 trillion, of which 40 cents of every dollar spent is borrowed. So while $1.1 trillion seems enormous, it’s really a drop in the ocean when looking at the promised spending over the next decade.
So listen carefully to soothing promises of fiscal restraint and concern about the deficit (and debt) in the coming weeks as the administration and Congressional Democrats give lip service to PAYGO and spending restraint. Then review this chart. The chart is their plan. If you can find any spending restraint or real deficit or debt reduction in there, please point it out. This budget and the outlying budgets are a plan for fiscal ruin. We now, for the first time, owe more than our entire GDP is worth, and the Obama administration apparently plans to see if it can double that in the shortest time possible. Any doubts about where this is headed?
And: are you beginning to understand what the Tea Parties are about yet?