WSJ: Let’s not forget Obama’s already-imposed new taxes

posted at 12:00 pm on July 11, 2011 by Ed Morrissey

The Wall Street Journal can barely believe that Barack Obama made $1 trillion in new taxes the cost to Republicans for raising the debt ceiling and making cuts in federal spending.   Obama keeps saying that he has cut taxes, but the Journal reminds people that Obama has raised taxes, too — and in key ways that impact capital.  The ObamaCare bill will raise taxes in a number of unpleasant ways, all in support of vast new federal spending and regulatory adventurism, with these just a few of the worst:

• Starting in 2013, the bill adds an additional 0.9% to the 2.9% Medicare tax for singles who earn more than $200,000 and couples making more than $250,000.

• For first time, the bill also applies Medicare’s 2.9% payroll tax rate to investment income, including dividends, interest income and capital gains. Added to the 0.9% payroll surcharge, that means a 3.8-percentage point tax hike on “the rich.” Oh, and these new taxes aren’t indexed for inflation, so many middle-class families will soon be considered rich and pay the surcharge as their incomes rise past $250,000 due to tax-bracket creep. Remember how the Alternative Minimum Tax was supposed to apply only to a handful of millionaires?

Taxpayer cost over 10 years: $210 billion.

• Also starting in 2013 is a 2.3% excise tax on medical device manufacturers and importers. That’s estimated to raise $20 billion.

• Already underway this year is the new annual fee on “branded” drug makers and importers, which will raise $27 billion.

• Another $15.2 billion will come from raising the floor on allowable medical deductions to 10% of adjusted gross income from 7.5%.

• Starting in 2018, the bill imposes a whopping 40% “excise tax” on high-cost health insurance plans. Though it only applies to two years in the 2010-2019 window of ObamaCare’s original budget score, this tax would still raise $32 billion—and much more in future years.

• And don’t forget a new annual fee on health insurance providers starting in 2014 and estimated to raise $60 billion. This tax, like many others on this list, will be passed along to consumers in higher health-care costs.

While Obama wanted Boehner to put higher tax rates on the line for a deal, the President wasn’t willing to part with any of ObamaCare’s new taxes or spending.  The White House did agree to tax reform in exchange for temporarily higher rates, but over the weekend, the Journal smelled a rat — or maybe just paid attention to history:

The proposed deal would also include some kind of “trigger” device, so far undefined, that would compel House and Senate negotiators to complete tax reform discussions over the next several months. We’re told the White House has said it is open in principle to a top rate of 35% on individuals and something like 26% or 27% on corporations—in return for closing various loopholes.

More troubling than these details is the staggered timing. Republicans would be putting their fingerprints on a tax increase in return for spending cuts as a first order of business, which would raise the dividend and top income tax rates to 39.6% (from 35%), or 41% if you include the phase-out of deductions. (Plus the 3.8% payroll tax hike baked into ObamaCare.) Only then would Mr. Obama and the Democrats negotiate the details of tax reform and lower overall rates.

But why at that point would Democrats want tax reform? They’d have achieved their main political goals of a huge debt-reduction deal, getting GOP cover for a tax increase, and putting Republicans cross-wise with the tea party. Raising tax rates first also makes the math of tax reform that much harder to negotiate on both revenue and income-distribution grounds. Under the Beltway’s scoring rules, cutting rates would look like an even bigger gain for higher-income folks and an even bigger revenue loss for the Treasury.

In other words, Mr. Boehner would make his ultimate goal—tax reform—that much more difficult to achieve politically. And that’s assuming the entitlement cuts he gets are genuine—not merely cuts to doctors or hospitals that won’t happen in practice. It also assumes that the “trigger” for tax reform is strong enough to override liberal obstruction in the Senate. We’ll see a unicorn first.

We don’t need to look too far back in American history for a primer on this tactic.  A Democratic Congress convinced George H. W. Bush to raise taxes in exchange for a promise to cut spending in 1990, forcing Bush to reverse his “read my lips” pledge.  Not only did the Democrats fail to deliver cuts or tax reform, they then used the “read my lips” clip in the 1992 presidential contest.  Before that, Democrats in Congress convinced Ronald Reagan to sign an amnesty bill in exchange for reforms in border security and control, only to renege on that as well.

Any deal on taxes will have to come as part and parcel of overall tax reform, not a tax hike with a cross-our-hearts promise to maybe, someday, if-the-weather-is-right conditional pledge to simplify and flatten the tax code on either corporations or individuals, or both.  That will take a lot of work, which is why former CBO director Douglas Holtz-Eakin says that a “grand bargain” was always unrealistic in the time frame needed for the debt-ceiling talks:

It was always too much to hope that President Obama and congressional Republicans could agree on tax reform, Social Security reform, Medicare reform, and Medicaid reform on the accelerated timetable that the debt-ceiling vote requires. So it is hardly surprising that talk of a “big deal” was just that — talk. Now the negotiators are back to the nuts and bolts of a real deal, and let’s hope that they get to an agreement quickly.

On the merits, the outline of the real deal is straightforward. The research indicates that economies that have a dual growth and debt problem should focus on keeping taxes low, and reforming them. Keeping them low is the best possible outcome at present; tax reform remains a 2013 issue. In addition, troubled economies should cut spending, particularly transfer programs and government employment. So spending cuts have to be the focus of the talks.

Vice President Biden has said numerous times that the negotiators had arrived at $2 trillion in acceptable spending cuts. That is a good number — largely for political reasons that I will return to below — but the real test of an agreement is not the size of the cuts, but rather their quality. A good deal will have actual cuts in fiscal 2012 discretionary spending, strong enforcement of medium-term caps on discretionary spending, and real changes to the entitlement programs that lie at the heart of the debt explosion.

Let’s get the debt ceiling off the table with the kind of cuts that Republicans have already negotiated, and move the impasse to the 2012 elections.  Voters can then make their wishes known on whether they want massive, economy-killing tax hikes as a solution to the accelerated acquisition of debt over the last three years, or whether they want — as they made clear in the 2010 midterms — significant reductions in government spending instead.

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Demagogue in Chief

Schadenfreude on July 11, 2011 at 12:01 PM

I haven’t, too bad many in the media have.

txmomof6 on July 11, 2011 at 12:03 PM

Democratic Congress convinced George H. W. Bush to raise taxes in exchange for a promise to cut spending in 1990, forcing Bush to reverse his “read my lips” pledge. Not only did the Democrats fail to deliver cuts or tax reform, they then used the “read my lips” clip in the 1992 presidential contest. Before that, Democrats in Congress convinced Ronald Reagan to sign an amnesty bill in exchange for reforms in border security and control, only to renege on that as well.

One wonders how they could have been so foolish as to trust Democrats’ promises. Especially why Bush trusted the Dems after what happened to Reagan and amnesety.

Wethal on July 11, 2011 at 12:06 PM

Obama has wasted taxpayers’ money to the tune of thuggery.

People who don’t see through this charlatan, deserve him fully.

Schadenfreude on July 11, 2011 at 12:06 PM

A media mogul, a bank chairman, an oil executive, a corporate-jet depreciation-claimant are easily demonizable: As President Obama cautioned CEOs a couple of years back, “My administration is the only thing between you and the pitchforks.”

More fool us. Our pitchforks are misdirected.

Schadenfreude on July 11, 2011 at 12:09 PM

That presser speaks for itself. He’s only serious about political posturing and class warfare.

gaius on July 11, 2011 at 12:09 PM

This is the affect of the dummying down of the American voter. It shows you what you can get away with when the MSM is in your back pocket.

The is the “Important War” the GOP was talking about back when the budgebattlele was going on. Well, if the GOP caves on this one they are finished as a national party.

NickDeringer on July 11, 2011 at 12:10 PM

This is not about what is best for the country, it’s all about winning the public relations debate over the debt limit, and gaining a political advantage in the resulting deal. Obama’s in full campaign mode now and everything he does is polled and focus grouped to death before he puts it out there.

MJZZZ on July 11, 2011 at 12:12 PM

I’m surprised that Boehner didn’t walk into this ambush. Who has he started listening to?

bloviator on July 11, 2011 at 12:14 PM

People who don’t see through this charlatan, deserve him fully.

Schadenfreude on July 11, 2011 at 12:06 PM

I don’t deserve him. I saw right through him when he was in the Illinois legislature. Yet there he is making my life impossible on a daily basis.

Tommy_G on July 11, 2011 at 12:16 PM

The is the “Important War” the GOP was talking about back when the budgebattlele was going on. Well, if the GOP caves on this one they are finished as a national party.NickDeringer on July 11, 2011 at 12:10 PM

I agree. And I pray that they don’t cave. But if they do………..so be it.

VegasRick on July 11, 2011 at 12:17 PM

ENOUGH! THESE SPINLESS RINOS NEED TO STAND FIRM….DRAW THE LINE AND LET THE REVOLUTION BEGIN NOW!!!!!!!!!!

SDarchitect on July 11, 2011 at 12:18 PM

Let’s get the debt ceiling off the table with the kind of cuts that Republicans have already negotiated, and move the impasse to the 2012 elections. EM

Yep. Which is Obama’s worst nightmare. As Jake Tapper reported:

The president again took the idea of a short term debt ceiling fix off the table again – whatever Congress passes in terms of deficit reduction, the debt ceiling needs to be raised until after November 2012.

For Obama, that’s the ball game.

Barnestormer on July 11, 2011 at 12:20 PM

Dig in your heels; don’t raise the debt ceiling without $500 billion a year in hard, verifiable spending cuts, starting immediately. No phase-in BS.

Get the 50% of people who pay no taxes to get some skin in the game. We need to eliminate O’Bozo’s wealth redistribution reparations structure and his “vote Democrat and pay no taxes” gambit with the ghetto. A flat tax reform might be the best reason to extend the debt ceiling.

Without something really strong… eff it. Shut the damn government down.

Jaibones on July 11, 2011 at 12:22 PM

Remember when everyone was saying that Obama needed to show some leadership and he needed to get involved in the debt talks. It seems like ever since Obama got involved it has gone to hell. His insistence on a “big” deal and tax increases has undermined the whole process. Isn’t it better when this guy is not involved?

JohnInCA on July 11, 2011 at 12:23 PM

Let’s not forget Obama’s already-imposed new taxes

Kinetic Revenue Enhancements.

Check your email, WSJ.

BobMbx on July 11, 2011 at 12:25 PM

I agree with Tommy_G above…I saw through the guy before the D primaries, and here I am stuck with his policies. Just like everyone else, well except those who have waivers.

JohnTheBuilder on July 11, 2011 at 12:25 PM

I think the GOP should propose a tax increase to the 48% of the Americans who pay no taxes right now.

Fair share and all.

gophergirl on July 11, 2011 at 12:27 PM

HOLD THE LINE!

Oil Can on July 11, 2011 at 12:29 PM

Dig in your heels; don’t raise the debt ceiling without $500 billion a year in hard, verifiable spending cuts, starting immediately. No phase-in BS.

Yea..Yea…Yea????

The GOP will bend down and take it whre the sun don’t shine.
We are being taken agian my friends.

Boehner Blinks our Government Stinks!

Its All about the Re-election in 2012 and the Conservative base will vote against Obama regardless.

We shoud put up a Strong Tea-Party Candidate against Boehner if/when he caves.

SayNo2-O on July 11, 2011 at 12:33 PM

Ed, that picture of Øbama holding the ball for Boehner says it all. Boehner’s not swift enough to avoid that trick. Worse yet, he keeps falling for it.

petefrt on July 11, 2011 at 12:35 PM

HOLD THE LINE!

Oil Can on July 11, 2011 at 12:29 PM

All you guys are dreaming. With the MSM backing This is a done deal. Obama wins. After all isn’t he the smartest guy ever to enter aroom. Looks like it!

SayNo2-O on July 11, 2011 at 12:35 PM

Folks, if you have not already contacted the Speaker and the Majority Leader’s offices, please do so and tell them “No tax increase!” Contact your congressman and deliver the message, “Do not waver! Cut spending and move us off the road of bankruptcy.”

The President can pay the interest on the debt, and meet retirement, Medicare, and military obligations, if the debt ceiling is not raised. The time to start living within our means is now.

SheetAnchor on July 11, 2011 at 12:39 PM

How about this for a negotiating stance—-

We’ll take all 4 trillion in spending reductions NOW and phase in the tax increase over 10 years.

dirtseller on July 11, 2011 at 12:39 PM

If you think Dick With Ears was funny earlier today, prepare yourself for this:

Nina Totenberg Warns Of Government “Intertwined” With Press

Keep in mind Totenburg works for a federally-funded “press” organization.

Better get the starch out, there’s irony in there.

BobMbx on July 11, 2011 at 12:40 PM

You know, the Wall Street Journal has really been doing a lot of damned good work these days.

I don’t know how many billions of dollars the government pays “economists” to publicize endless “explanations” for why more government will always solve every problem. But it must cost at least several thousand dollars to counter that with factual analysis every day. And the WSJ is footing that bill for us. Kudos.

logis on July 11, 2011 at 12:51 PM

You know, the Wall Street Journal has really been doing a lot of damned good work these days.

Its called hedging your bets. They smell a change of administrations coming and don’t want to be caught outside Palins’ press room.

BobMbx on July 11, 2011 at 1:01 PM

If talks stall, raise the debt ceiling enough for 1 week of SS, Medicare, Medicaid, and defense and nothing more.
Repeat as required.

tomg51 on July 11, 2011 at 1:09 PM

One wonders how they could have been so foolish as to trust Democrats’ promises. Especially why Bush trusted the Dems after what happened to Reagan and amnesety.

Wethal on July 11, 2011 at 12:06 PM

Because, to Bush 41, Reagan was a boob. Bush was part of the ruling class. The Dems were his peeps. They would never do something like that to him!

stvnscott on July 11, 2011 at 1:17 PM

Let’s get the debt ceiling off the table with the kind of cuts that Republicans have already negotiated, and move the impasse to the 2012 elections.

Let’s not and cut government spending by 40% immediately.

After all, that’s only back to about 2006 levels, and things weren’t all that horrible back then.

The debt ceiling is a better deal by itself than any alternative I’ve heard to date.

cthulhu on July 11, 2011 at 1:26 PM

Any politician – Republican or Democrat – who makes deals in which they give something now in exchange for something ill-defined in the future, deserves what he gets.

greggriffith on July 11, 2011 at 3:12 PM