Obama’s Tax Problem

During the campaign, Obama sought to defeat the old Liberal label of “tax and spend”.  He swore fiscal responsibility and pay-go.  $1.58 trillion in red ink later and here we are.

He promised something else.  Obama promised no tax increases on people who make less than $250,000 a year.  That number fluctuated, but in the end it was between $150,000 and $250,000.  Now Obama is in trouble.

It shouldn’t come as a surprise.  All throughout the campaign, Conservatives kept saying you can’t have fiscal responsibility, buy whatever you want, and give 95% of Americans a tax cut.  We said even if you don’t balance the budget, if you spend as much as Obama was promising, you will have to raise taxes.  Some of us even predicted that Obama would seek to redefine the word tax in order to get around it (e.g. raising government fees, licensing costs, and other such things).

On Sunday with George Stephanopoulos, that is exactly what Obama did.  First he argues that private insurance companies raising rates because people use the ER for free is a tax increase.  Then he argues that adding up to $3,800 to a family’s tax bill for not buying government approved insurance is not a tax increase.

This issue is about to get even worse for Obama.  The White House has recently admitted that Conservatives were correct in their estimates of what Cap and Trade taxes would cost the average family in the US.  When the administration said it would cost families the equivalent of a postage stamp a day, they meant if you were mailing bricks.  The final White House number comes to $1,761 per family in new Cap and Trade taxes.  Considering how well they’ve done with their other estimates lately, like how high unemployment would get, I am not too optimistic that the number will be so low.

If Democrats stick with the Baucus plan, they will have a new tax issue to answer for.  The Baucus plan pays for itself through taxes on medical equipment, clinics, insurance companies, and medical savings accounts.  A rational person might think that if you wanted to cut medical costs, you would actually cut taxes on all these things.  After taxing these things and making them more expensive, the Baucus plan gives you tax credits so that you can afford to buy insurance at the pretax rates.  It generously gives you up to 13% of your income back to buy health insurance, if you don’t make too much.  Will that be enough to pay for health insurance when the Baucus plan increases healthcare costs by 30% with his new embedded taxes?  By the way, in case you were wondering, I am assuming that some of the cost of the Baucus plan actually will be paid for by Medicare cuts like they promise.  But seriously now, what are the odds of that happening?

Consider this, to pay for his trillion dollar deficits, Obama is considering raising the top tax bracket to 39% (a 4% increase) and tacking on a 5% “surcharge” for a total tax increase on the richest Americans of 9%.  At the same time, he is going to increase your family’s utility bill through Cap and Trade taxes by $1761 and fine you $3,800 if you don’t buy government approved insurance.  By my calculations, if you have a family of four making 300 times the poverty level, that’s a tax increase of 9%.  Now don’t get too upset, the rich will be paying embedded Cap and Trade taxes too.  Their taxes will still go up more than yours.  Feel better now?

The Baucus bill is a gift to the insurance lobby.    Think about it from the insurance company’s perspective.  Yes, you pay higher taxes as an insurance company, but then that money is given to your potential clients and they are told they must buy your product or they will pay government penalty taxes.  30 million new customers, whether they need insurance or not.  In addition, the government takes everyone who can’t afford you or is high risk and puts them in a government co-op (totally different than a government option).

Count on Obama to claim credit for giving 95% of Americans a tax cut when you get your health insurance credits.  Don’t count on him admitting that Cap and Trade, embedded healthcare taxes, tax penalties for not buying government approved insurance, taxes on your employers and taxes on your employee and health savings accounts are actually tax increases on those of us who make less than $250,000.

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