By Peter Roff
Senior Fellow, Institute for Liberty/Former Senior Political Writer, United Press International
Though he campaigned as an economic centrist, the Obama budget that went to Capitol Hill last week marks a dramatic return to the high-tax ideology of the pre-Clinton Democratic Party. His budget includes a net tax increase of over $1 trillion over the next decade. If that were not bad enough, the same document reveals that more than $325 billion of the advertized $770 billion in family tax cuts is actually new spending. And it gets worse from there.
According to analyses of the budget undertaken by different public policy organizations:
No. 1: The Obama budget raises the top income tax bracket to 39.6 percent from 35 percent and takes the 33 percent bracket to 36 percent. The Obama budget officially estimates these new rates will transfer $339 billion out of the private economy and into the public coffers.
No. 2: These new rates will depress economic activity even further, producing less revenue than the budget writers expect it to. Supporters of the increased rates claim the new rates only hurt the rich. These new higher rates will apply to a small minority of the minority of working Americans who actually pay income taxes but they are the rates at which two out of every three dollars in profits realized by small businesses are taxed. This includes, by some estimates, 90 percent of the profits from partnerships and subchapter S corporations and 40 percent of the profits from sole proprietorships.
No. 3: The budget also presumes the death tax will — after it reaches zero in 2010 — go back on the books at a top rate of 45 percent and a $3.5 million exemption because Congress failed to make its elimination permanent. This is hidden in a footnote in the Obama budget, not included in the policy proposals or the $1 trillion price tag.
No. 4: The double-taxation of international corporate profits will be made even worse by applying it to profits before they are repatriated, bringing in an estimated $210 billion in tax revenues and acting as a powerful incentive for capital to leave the United States and a time when we desperately need it to remain here.
No. 5: The Obama budget raises the capital gains and dividends tax for upper-income earners from 15 percent to 20 percent. And it raises the dividends tax in the same way, adding anther body blow to an already reeling Wall Street and to seniors living on retirement investment.
No. 6: The Obama budget also contemplates a “cap and trade” system it estimates will generate close to $650 billion in revenues that will fund the Making Work Pay checks (including those $325 billion in so-called “tax cuts” for people who don’t pay taxes), energy research, and other social spending. Previously, energy taxes were used only for specific and designated purposes, like filling the federal highway trust fund. And every American family will have to pay these new taxes, as well as the other increased taxes on energy contained within the budget.
President Obama sent Congress a “spend and tax” budget. Having already incurred the obligations to spend the money in the stimulus package, the Democrats are now sending the American people the bill. Regardless of what was promised or claimed during the presidential campaign it is now clear that Obama meant what he said when he promised to “spread the wealth around.”