Top Ten Tax Hikes in Obama's Simpson-Bowles/Gang of Six Plan


Posted by Ryan Ellis on Wednesday, April 13th, 2011, 1:30 PM PERMALINK


President Obama today released his new plan in response to House Budget Committee Chairman Paul Ryan’s budget resolution.  It contains the worst tax hikes from President Obama’s FY 2012 budget and the Simpson-Bowles/Gang of Six proposals.  By contrast, the Ryan budget is tax revenue-neutral, proposes pro-growth tax reform, cuts spending, and reforms the entitlement programs. 

There are clearly two budget teams in Washington: the tax reform/spending cut team, led by Paul Ryan, is where conservatives should be.  Those on the Simpson-Bowles-Obama-Gang of Six team want to see higher taxes and mere Democrat promises of spending cuts.  Now is the time to pick your team.

The main features of the Obama/Gang of Six tax hike are the following:

1. Raise the tax revenue target from 18-19 percent of the economy (historical) to 21 percent of the economy.  This level of taxation has never been sustained, and would mean hiking taxes in order to pay for Obama-sized government.

2. Raise net taxes by $1, $2, or $3 trillion over the next decade.  Obama has adopted the Simpson-Bowles/Gang of Six revenue target.  According to Simpson-Bowles itself, this is a net tax hike of $1 trillion.  Paul Ryan believed the actual tax hike was closer to $2 trillion.  The Heritage Foundation said $3 trillion.

3. A promise of $3 in spending cuts for every $1 in tax hikes.  This is a repeat of 1982, when President Reagan was promised the same ratio by a Democrat Congress.  The tax hikes went through, but the spending cuts never materialized.  A similar con-job happened in 1990, when President George H.W. Bush broke his “read my lips” promise and agreed to $2 in spending cuts for every $1 in tax hikes.  Spending actually came in higher than the pre-deal baseline.  American taxpayers won’t be fooled again.

4. A tax hike “trigger” to pay for higher levels of government spending.  Everyone knows that this trigger will be pulled.  Its form in the Simpson-Bowles plan was to give a “haircut” to every tax deduction and credit in the code, including the mortgage interest deduction and charitable contributions.

5. Raise the rate at which two-thirds of small business profits face taxation, from 35% to 39.6%.  You can’t raise the tax rate on households making more than $250,000 per year without also raising the tax rate at which most small business profits face taxation.

6. Raise the tax rate on capital gains and dividends from 15% to 23.8%.  The combination of the Obama budget tax hike and the Obamacare “surtax” on investment results in the highest capital gains tax in a generation.

7. Raise the death tax rate from 35% to 45%, and cut the exemption from $10 million to $3.5 million.  This is the result of Obama’s budget, and would certainly be needed to raise taxes by as much as he would like to.

8. No rate target on “tax reform.”  By calling for higher tax rates on those making more than $250,000 per year, President Obama is making “broaden the base, lower the rate” tax reform impossible.  Instead, he is proposing the worst of all worlds here: hike the rate, broaden the base (that is, get rid of deductions and credits), and hike net taxes in the process.  This is the perverted opposite of tax reform.  He does not even propose a rate target for corporate tax reform, even though the United States has the highest corporate income tax rate (40 percent) in the developed world.  Paul Ryan proposes top personal and corporate rates no higher than 25 percent.

9. Keep the higher taxes of Obamacare in place.  By cementing Obamacare in place, President Obama’s plan keeps the 20 new or higher taxes in that jobs-killing law.  This includes:

  • the excise tax penalties associated with the individual and employer mandates
  • the 3.8 percent surtax on investment income
  • the “Cadillac plan” tax on health insurance plans
  • the cap on flex accounts that will hurt families with special needs children
  • the hike in the Medicare payroll tax to 3.8 percent
  • the “medicine cabinet tax,” which prevents buying over-the-counter medicines with pre-tax dollars in an FSA, HSA, or HRA
  • the new tax on medical device manufacturers
  • the new limitation on medical itemized deductions
  • the tanning tax

10.  Violates President Obama’s oft-repeated campaign promise to not raise “any form” of taxes on families making less than $250,000 per year.

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