Barack Obama's new middle class tax hike

The UK Daily Mail is hilariously brutal to Barack Obama’s long-delayed 2014 budget proposal, summing it up as a mixture of “bad math, phantom revenues, imagined spending cuts, and a middle-class tax hike.”  The White House is really phoning this one in.  They’re recycling the knee-slapper about how the new spending plans of the man who already added 60 trillion dimes to the national debt are “fully paid for, so they do not add a single dime to the deficit.”  They’re even claiming ObamaCare will save money somehow.

You’ll see a lot more of this “ObamaCare savings” voodoo in the future.  The program’s costs have soared far beyond all initial estimates, even as it fails to meet a single promise that was made.  But any time a new estimate of costs falls below the worst-case total-meltdown scenario from the previous year, it will be portrayed as a wonderful “savings.”  In other words, if ObamaCare is $2 trillion over cost, but next year’s estimates say it will only be $1.6 trillion over cost, it will be touted as $400 billion in nearly miraculous “savings.”

Beneath all the smoke and mirrors, Obama’s new budget proposal could at least be described as a bit more…. restrained than the ludicrous fantasies he usually tosses at Congress between star-studded White House parties.  (Oh, the horrors of austerity!)  An extremely charitable reading of the new budget might conclude that it only raises spending a little.  “So where are the net spending cuts?” House Speaker John Boehner’s press secretary, Brendan Buck, snorted.  “I guess they don’t exist.  The President’s budget will – at best – be flat on spending, or potentially even be a net spending increase.  Any deficit reduction will come exclusively from tax hikes.”

Ah, the tax hikes.  Those are the glittering centerpiece of Obama’s budget.  The stuff about government “spending cuts” is an accounting fiction, but you can take it to the bank that private American citizens will be paying more in taxes.  The Evil Rich get soaked, of course, but there’s a huge new middle-class tax increase built into Obama’s proposal to switch to the “chained CPI” method of calculating inflation.  The Daily Mail explains:

The chained CPI signals a shift in how the federal government will calculate everything from Social Security payouts and congressional pensions to college students’ Pell Grants and veterans’ benefits. Anything tied to cost-of-living increases would be subject to a new formula.

The White House’s budget blueprint suggests that these programs would see $230 billion in costs savings over 10 years. The Congressional Budget Office puts the number at $216 billion.

The CBO also notes, however – and the White House omits – that a switch to the chained CPI will also raise more than $124 billion in new tax revenues.

The money will come pouring in because the consumer price index also controls income tax brackets, tax filers’ standard deductions, nontaxable contribution limits for 401(k) retirement plans, and more.

So millions of individual Americans will see themselves moved involuntarily to higher tax brackets, and middle-class taxpayers in particular will lose some of the tax credits and deductions that they count on.

So Obama’s promise never to raise taxes on the Sainted Middle Class – already broken in numerous ways, including ObamaCare – goes completely up in smoke, and in exchange he’ll only spend a few billion more next year, instead of the hundreds of billions he really wanted.  He’s even got another $50 billion in “infrastructure stimulus” packed in there.  That’ll eat up over a third of the revenue from your middle-class tax hike, all by itself.

There’s also a tobacco tax increases in the President’s proposal, ostensibly to fund “a new program of universally available preschool” on top of the billions already poured into the educationally useless Head Start program.  The middle class included a fair number of tobacco consumers, doesn’t it?  There is no obvious logical connection between tobacco and preschool – it’s just a tax on something unpopular, to pay for a lollipop that voters will reflexively approve of, because nobody wants to be against more spending For the Children.  It’s just more social micro-engineering – with a big chunk of the money sluiced away into bureaucratic overhead, of course.

There are reasonable cases to be made for chained CPI and tax simplification through the elimination of deductions, but only in the context of reducing the total tax burden on Americans of every income level.  Eliminating deductions in concert with reduced tax rates and fewer tax credit subsidies – welfare dispensed through the tax code – is a great idea.  Wiping out deductions without the other reforms is a cash grab by greedy socialists.  If chained CPI makes more sense to measure inflation, as many economists believe, the entire system should be overhauled to use it.  As the Daily Mail surmises, plugging in chained CPI without changing anything else is another cash grab.

As for Social Security, the old system is rotted and teetering on the verge of collapse.  It should be privatized – that should have been done long ago – rather than forcing retirees to watch helplessly as the government tinkers with their benefits to keep its balance sheet from bursting into flames for a few more years.  But you’ll find no such bold ideas in President Obama’s latest budget proposal.  His “big ideas” involve finding new ways to squeeze money out of the private sector, without any pretense of reducing either the national debt or the size of government.


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