Why The Obama Tax Hikes Have Only Just Begun

When an economy is booming and jobs are plentiful, a “do no harm” approach to public policy will suffice. If GDP were expanding at a 4% annual rate and the unemployment rate were 5% and the national debt were low, then the fiscal cliff deal might be tolerable rather than terrible. While it won’t create any jobs or add to growth — just the opposite in fact — and it will only cut the national debt by a rounding-error amount, passage does avoid an across-the-board income tax hike and probable recession.

So that’s something. But good enough? Not really. Avoiding major unforced errors is necessary but insufficient when you’re way behind in the game.

But we’re not even doing that. Total taxes are going up some $220 billion this year, including both the Obama income tax hikes and the Obamacare tax hikes. Even worse, the income tax hikes raise the burden on working, saving, and investing. They make our mess of a tax code even more damaging to growth than what it was before.

Nor is Obama done pushing higher taxes. As he said New Year’s Eve, concerning the outstanding issues of the sequester and debt ceiling:

 I want to make clear that any agreement we have to deal with these automatic spending cuts that are being threatened for next month, those also have to be balanced, because, remember, my principle always has been let’s do things in a balanced, responsible way. And that means the revenues have to be part of the equation in turning off the sequester and eliminating these automatic spending cuts, as well as spending cuts. Now, the same is true for any future deficit agreement. Obviously we’re going to have to do more to reduce our debt and our deficit. I’m willing to do more, but it’s going to have to be balanced. We’re going to have do it in a balanced responsible way.

How much more “balance” does Obama want?

1. Well, the fiscal cliff deal is a $620 billion tax hike, according to the Congressional Budget Office. Obama’s original offer to House Speaker John Boehner called for $1.6 trillion in tax hikes, including a) $960 billion in higher tax rates and higher taxes on investment income along with b) $600 billion in additional taxes, such as limiting tax breaks for wealthier Americans.

2. In a November policy memo, White House economists thought a tax hike of around $500 billion was doable via broadening the tax base.

3. Also recall that the president’s 2013 budget called for a $300 billion corporate tax hike.

So adding it all up, it would seem the president’s second term goal is for roughly $2 trillion in new taxes. We’re only one-third of the way there.

But what leverage will Obama have to make good on his tax-hike threats? As The Wall Street Journal editorial page notes today, “The President has had unusual leverage over Republicans because he just won re-election and because taxes were going to go up even if they did nothing.”

One potential Obama bargaining chip is the sequester, particularly the $500 billion in defense cuts that many GOPers loathe. So perhaps Obama can offer to turn off the defense cuts in exchange for $500 billion from limiting tax breaks for the rich. And then maybe another $300 billion in corporate tax hikes for agreeing to change how Social Security benefits are calculated. Many scenarios are possible. What’s for sure is that the Obama desires vastly higher taxes to pay for his expanded welfare state. Desires and needs them. And it’s now Democrat economic theology that tax rates could return to pre-Reagan levels without hurting growth.

Tax hikes? Obama is only just getting started.

  1. Paul Erickson

    “Balanced” has always connoted good sense and maturity when discussing fiscal matters.  Obama has redefined the word.  When he uses it he gets the benefit of that built-in positive connotation, but it in no way means the same thing.

    Hey Barry, did you say “balanced?”  You didn’t build that.

  2. The King Prawn
    Patrick in Albuquerque: The notion that the DoD can’t take a 10% whack is ludicrous, so let us not give Obama that lever.

    The problem is that the bureaucrats who run DoD are the same bureaucrats who cut local police and fire funding every time they want to pass a new levy to fund something entirely unrelated. The most vital of parts of our military will take the first cuts to make it as politically painful as possible.

  3. Ralph Baskett

    Republicans should assert at every opportunity that Obama’s tax increases, healthcare takeover and new regulations will produce another recession. They should assert that Obama’s stimulus and anti-business policies have actually been the depressant that has caused the current malaise. They should argue that tax reform that aims at encouraging healthy, robust economic growth is the only true, sustainable stimulus.  House Republicans now have an opportunity to develop a tax reform bill unencumbered with all the usual compromises. Then when the recession takes hold, they can use Obama’s favorite tactic to get it passed, “take it or leave it.”

  4. Patrick in Albuquerque

    I agree that they’ll do this. But if that’s our big sticking point, how about a BRAC-like approach?

    The King Prawn

    Patrick in Albuquerque: The notion that the DoD can’t take a 10% whack is ludicrous, so let us not give Obama that lever.

    The problem is that the bureaucrats who run DoD are the same bureaucrats who cut local police and fire funding every time they want to pass a new levy to fund something entirely unrelated. The most vital of parts of our military will take the first cuts to make it as politically painful as possible. · 1 hour ago

  5. Duane Oyen

    We do need to stop talking in 10 year terms and looking at 2 year time periods.  What is the reasonably accurate projected effect, allowing for Hauser’s Law, etc., this year and next year?  When I was working with DoD, we met our FYDP requirements for procurement, by buying one this year, two next year, and 10 billion in years 3 through 5.  These 10 year static projections tend to operate about the same way.

    ObamaCare taxes are a separate issue not up for debate at this time- they are built into a policy that needs to be addressed otherwise, not as part of the tax bill.

  6. Whiskey Sam

    Balance and compromise are terms meaning “Abandon your principles and give the Democrats a little less than what they want”.  Leviathan grows unabated.

  7. Patrick in Albuquerque

    The notion that the DoD can’t take a 10% whack is ludicrous, so let us not give Obama that lever.

    We need a new strategy. Let’s totally shut up for a few months. Every time BO says something about fixing the national debt, simply reply “send us some specifics.” Followed by “sorry not good enough”. And then shut up again. Negotiating with this guy is impossible.

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