Obama's Tax Hikes

Why does the White House want to raise taxes during a recession?


Leave it to President Obama. On September 8 he announced a $450 billion stimulus consisting of hundreds of millions of dollars in tax cuts. On September 19 he announced he wants a $1.5 trillion tax increase.

The president tried to ease the whiplash by dividing the tax cut and the tax increase into two separate speeches, and by separating them by 11 days. And to some degree the approach fits with Keynesian economic and political orthodoxy. The idea is that the economy needs a short-term boost to end the recession, but that longer-term the focus should be debt and deficit reduction.

This has the added political virtue for the president of giving voters a tax cut going into the 2012 election, while delaying any tax increase until after the election.

On Medicare cuts, the president takes this to the extreme of delaying certain savings until 2017. "Any savings that affect beneficiaries do not begin until 2017," a White House "fact" sheet declares. In other words, until after President Obama has safely completed his hoped-for second term. Convenient, isn't it? How else to explain why they picked 2017 instead of, say, 2016?

The quip about the alcoholic who prays, "Lord make me sober but not too soon" has been repeated by so many columnists that at this point it is a cliché. But as a wise old editor once told me, "They're clichés for a reason." In this case, the reason is that it so accurately describes the situation.

A rational voter might look at the hundreds of millions in proposed tax cuts announced on September 8 and the $1.5 trillion proposed tax increase announced on September 19 and say, you know what, this nets out as a huge tax increase. How about you just leave me alone?

At moments in his September 19 speech, Mr. Obama almost sounded like Steve Forbes, or some other free-market tax reformer. Mr. Obama mentioned that the tax code was more than 10,000 pages long, that the volumes stacked atop each other would be five feet tall, and that America's corporate tax rate is among the highest in the world. I half-expected, half-hoped that the next words out of Mr. Obama's mouth would be a Forbes-like plea to "kill it, drive a stake through its heart, bury it, and make sure it never rises again to terrorize the American people."

But if fundamental tax reform and simplification is the goal—and it's a worthy one—linking it to a $1.5 trillion tax increase is, alas, a sure way to kill it. If the tax reform grows the economy overall and government revenues then rise as a kind of unintended consequence, that's one thing. But listening to Mr. Obama drone on about what's a "fair share," one gets the sense he sees tax reform not as a worthy goal in itself but merely as cover for his big tax increase.

This was clear from Mr. Obama's insistence, in the September 19 speech, "This isn't class warfare." He had already, in the same speech, explained, "I reject the idea that asking a hedge fund manage to pay the same tax rate as a plumber or a teacher is class warfare." He went on, "Nobody wants to punish success in America."

Mr. Obama may want to ask himself why he keeps having to reassure Americans that he's not engaging in class warfare and that he doesn't want to punish success. I don't recall President Reagan or George W. Bush having to reassure Americans on those fronts. What will actually reassure Americans aren't more empty words from Mr. Obama but rather policies that let Americans keep more of what they earn and own long-term, not just until the next election.

Ira Stoll is editor of FutureOfCapitalism.com and author of Samuel Adams: A Life.