David R. Henderson  

Obama's Weird Tax Plan

My Thoughts on Monetary Policy... Supplemental Pessimism...
According to the Sept. 19 White House fact sheet, "The President calls on [the super committee] to undertake comprehensive tax reform, and lays out five principles for it to follow: 1) lower tax rates; 2) cut wasteful loopholes and tax breaks; 3) reduce the deficit by $1.5 trillion; 4) boost job creation and growth; and 5) comport with the "Buffett Rule" that people making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay."

But the administration's tax plan violates these principles. It raises rather than lowers tax rates, shrinks tax deductions to pay for more spending, makes no believable contribution to economic growth, has nothing specific to say about the Buffett Rule, . . .

This is from Alan Reynolds, "The Spend Now, Tax Later Jobs Bill." Wall Street Journal, September 22, 2011.

I noted yesterday Megan McArdle's post pointing out that for all Obama's talk about Warren Buffett and other rich people paying a lower percent of their income in taxes than secretaries do, his plan does nothing to change that for people like Buffett.

Alan Reynolds points this out too, but goes further. Obama himself, as Reynolds notes in the first paragraph above, advocated lower tax rates along with cutting loopholes and other tax breaks. But his own proposal is to raise tax rates.

I'm used to politicians saying one thing and doing another. I'm used to politicians lying. But it's strange for a politician to say one thing and then say the opposite, and act as if he's saying the same thing both times, all in the space of about a week.

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COMMENTS (6 to date)
kyle8 writes:

A flat tax would full fill most of those criteria. But something tells me he would not support it.

bill shoe writes:

Haha, now Obama is a serious libertarian:

"3) reduce the deficit by $1.5 trillion"

The deficit is, by definition, the annual rate of change of government debt. The 2011 deficit is, what, $1.1 or 1.2 trillion. Reducing this by $1.5 trillion would leave an annual surplus. I support this, but...

That is either a typo or the White House is pummeling language with a large, blunt instrument.

David R. Henderson writes:

@bill shoe,
Good catch, but the term Obama is using is Washington-speak. They arbitrarily choose a 10-year time horizon and they’re talking about a $1.5 trillion cut over 10 years.

Jim Glass writes:

But the administration's tax plan violates these principles.

Of course it does, the plan is pure political posing.

Obama's approval is down to 40% ... 49% in a new poll just said they intend to vote against him ... Carville said his advice for Democrats is "Panic!" ... all kinds of leakers from the White House have been describing Obama's people as hostile and patronizing to women, a mortal sin to the left (and one a run by Hillary might fix?) ... he has *political* problems.

It's a political tax proposal to shore up support on his left side. There is no intention or expectation of passing it -- even a good number of left-side commentators have noted this.

I've been doing tax-world work professionally for 20-odd years ... believe me, this ain't the first tax plan proposal made entirely for political posing reasons, with no intent to pass it, and it won't be the last.

You know what Bismark said about sausage and law? Multiply 10x for tax law.

David R. Henderson writes:

@Jim Glass,
All the points you make are good. I get all that. The reason I highlighted this, though, is what’s new is that he doesn’t even keep the “pose" over one week. He makes an argument for lower tax rates and within about a week proposes higher tax rates. He makes an argument for the Buffett tax and within about a week presents a proposal that doesn’t contain the Buffett tax.

Naveen Kalyani writes:

"reduce the deficit by $1.5 trillion", well, is it realistic indeed?

I would say yeah.
In a bid to accomplish such a dream, the US government must cut its spending on its defence sector! They spend a massive amount of money in that sector.

Why on earth the US government wanna spend dollars on the troops who are there in Afghanistan, Pakistan, etc?

Why no on spending dollars in its own economy rather than on its troops who are there in the other states?

Well, I guess the "Buffett Rule" would be an interesting one indeed.

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