Thread: Tax and Debt Bomb
#1 Tax and Debt Bomb
04-14-2011, 04:59 AM
- Join Date
- Apr 2005
We thought tax reform meant lowering rates and broadening the base by eliminating or cutting back on various deductions, credits, and loopholes. Thatís what the Bowles-Simpson commission proposed. Thatís what Paul Ryan and David Camp are working on. And thatís the pro-growth model.
But President Obama unveiled a much different tax-reform vision in his much-anticipated debt speech on Wednesday. He would raise tax rates on upper-income earners and small businesses. He also would eliminate deductions and credits, or so called ďtax expenditures.Ē The president referred to these tax-expenditure reductions as ďspending cuts.Ē In his context, they most certainly are not. They are more tax hikes.
Basically, the president is giving successful earners and small-business filers a double tax hike. Thatís what it really is.
Of course, the presidentís formula of estimating higher revenues to lower the deficit is completely wrong. The reality is that higher tax rates will slow the economy, inhibit new start-up companies, penalize investors, and may very well lose revenues and increase the deficit.
In the latter part of his speech the president did mention some kind of middle-class and corporate tax reform. But he gave no specifics.
He also touted $750 billion in discretionary spending cuts, but again without any details. Most of that amount probably comes from the recent continuing resolution to avoid a budget shutdown. Since Obama is extrapolating out twelve years, who knows how this is scored.
On the entitlement front, Obama rejected Paul Ryanís consumer-choice and competition approach to Medicare reform. Instead, he invoked the Obamacare central-planning agency called the Independent Payment Advisory Board, which is supposed to make reductions in Medicare. Medicare itself would exercise more price controls on prescription drugs, rolling back the consumer choice and competition established under George W. Bush.
In total, President Obama is claiming $4 trillion in deficit reduction over twelve years. But weíll never see it. Interest expense savings is supposed to make up $1 trillion of that amount, while the rest will somehow come from a concoction of fewer tax deductions, higher tax rates, and $400 billion in defense-spending cuts.
In effect, the president has moved to the left. He has embraced the Democratsí so called progressive caucus in the House by slashing defense and jacking up taxes, all while offering no serious entitlement reform.
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