Just about every tax that conservative activists in and out of Congress have fought for years is raised in the President’s $3.7 trillion budget request for 2012.
Based on studies of the Obama budget from various groups that have pored over it—including the Heritage Foundation and Americans for Tax Reform (ATR)—it is clear that if the document from the White House is ever enacted outright and signed into law, it would levy taxes on families and small businesses that would be nothing short of devastating.
As the President said in his State of the Union address and his press conference this Tuesday, the budget request calls for raising the top marginal income tax rate from 35% to 39.6%. In effect, this would be the undoing of the tax relief for the highest wage-earners that Obama agreed to as part of the tax package enacted during the lame duck session of Congress last December. According to ATR, this is a $709 billion tax hike over the next 10 years.
The Obama budget would also undo President George W. Bush’s tax cuts in another way—by raising the capital gains and dividends rate from 15% to 20% (the rate at the close of the Clinton administration in 2001).
Led by the 60 Plus Association of senior citizens, conservatives came close to an outright killing of the “death tax” (as 60 Plus head James Martin dubbed the estate tax) under Bush. In Obama’s plan, however, the death tax rate is raised from 35% to 45%, and the death tax exemption amount is raised from $5 million ($10 million per couple) to $3.5 million. Again citing ATR’s calculations, this means a $98 billon tax hike over the next 10 years.
Much like the Tax “Reform” Act of 1986, the Obama budget would flatten taxes by eliminating loopholes while opening the door to raising rates. Under this budget, companies would no longer be permitted to deduct the cost of punitive damages from a lawsuit settlement (tax hike of $300 million over 10 years) and the value of itemized deductions would be capped at the 28% bracket. This means that tax deductions would be cut for a variety of things: mortgage interest, charitable contributions, property taxes, state and local income or sales taxes, out-of-pocket medical expenses, and unreimbursed employee business expenses. Overall, this means a $321 billion tax increase over 10 years.
Had enough? The Obama budget incudes new bank taxes, new taxes on energy, and new life insurance company taxes, and it increases tax penalties, information reporting, and IRS information sharing. Along with being a 10-year tax increase of $20 billion, the latter three all add new muscle to (you guessed it) the IRS.
In short, the Obama budget would, if enacted in full, mean a $1.5 trillion tax hike over the next 10 years.
If you think this is the only means of bailing out the U.S. from the deficit, think again. And think about the jobs that could be created if that $1.5 trillion were left in the private sector.