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From The Business Insider, June 30, 2009:
Every politician (except Michael Dukakis) has campaigned on some version of "no new taxes" and most ended up breaking that promise.
It's how we do things in America, and as voters we've come to accept how it works. We're masochists. We like to be lied to.
Obama said he wouldn't raise taxes on anyone making under $250,000, a promise that's technically already been violated by new taxes on cigarettes and his pledge to sign cap & trade if it gets through The Senate. His aides would say those don't count.
But evens setting those aside, real tax hikes are almost certainly in the works, if only due to the massive amount of new spending (particularly on healthcare) this government has planned. The idea that it can all be financed on the (dwindling) $250k+ crowd is absurd.
Roger Altman of Evercore Partners and formerly of the Clinton administration writes today in the Wall Street Journal:
Only five months after Inauguration Day, the focus of Washington's economic and domestic policy is already shifting. This reflects the emergence of much larger budget deficits than anyone expected. Indeed, federal deficits may average a stunning $1 trillion annually over the next 10 years. This worsened outlook is stirring unease on Main Street and beginning to reorder priorities for President Barack Obama and the Democratic congressional leadership. By 2010, reducing the deficit will become their primary focus.
Why has the deficit outlook changed? Two main reasons: The burst of spending in recent years and the growing likelihood of a weak economic recovery. The latter would mean considerably lower federal revenues, the compiling of more interest on our growing debt, and thus higher deficits. Yes, the President's Council of Economic Advisors is still forecasting a traditional cyclical recovery -- i.e., real growth of 3.2% next year and 4% in 2011. But the latest data suggests that we're on a much slower path. Probably along the lines of the most recent Goldman Sachs and International Monetary Fund forecasts, whose growth rates average about 2% for 2010-2011.
A speedy recovery is highly unlikely given the financial condition of American households, whose spending represents 70% of GDP. Household net worth has fallen more than 20% since its mid-2007 peak. This drop began just when household debt reached 130% of income, a modern record. This lethal combination has forced households to lower their spending to reduce their debt. So far, however, they have just begun to pay it down. This implies subdued spending and weak national growth for some time.
Altman believes that sometime next year the Congress will be forced to bring up a new tax, possibly some kind of Europe-like VAT scheme.
Others have suggested that Obama will wait until after the 2012 election, when he's a lame duck though that may be too long a wait if the budget situation continues to deteriorate.
Bear in mind, this isn't all coming from Wall Street or conservative publications eager to undermine Obama's presidency.
Liberal commentator Matthew Yglesias penned a highly praised piece for the American Prospect arguing that liberals needed to embrace taxes sooner rather than later, and that selling Americans on the idea of higher taxes should be part and parcel with selling Americans on the idea of a more active role for government in life -- which Obama has done pretty well, both in the campaign and since taking office:
Are broad-based tax increases politically viable? Nobody can say for sure, but polling during the campaign season consistently showed that despite Obama's promises, around half of the public anticipated paying more taxes if he won the election. And a Rasmussen poll showed in March that 66 percent of the public believed Obama was likely to raise taxes on voters making less than $250,000 a year. Yet his approval ratings are high. Politicians who labor under suspicion of being tax raisers might be better off defending tax hikes on the merits rather than denying the charge. The White House and its allies vigorously contest conservative charges that auctioning off carbon permits amounts to a tax, when they should be acknowledging that conservatives are correct and explaining why such a tax is necessary.
Progressive taxation is an important principle. But the idea that further changes to the tax code should exclusively target the wealthy is ultimately counterproductive. Making the case may be difficult, but refusing to try to make it amounts to conceding defeat. At the end of the day, persuading people to support a more active role for government means persuading all of them that such a government is worth paying for.
None of this will make business leaders very happy (though more and more are eager for a national healthcare system that shifts that particular burden to the government), but this is about political reality. Thinking the government can occupy more space than it currently does without costing more is dreamy.
And that being said, it's almost scarier if we don't raise taxes, not because we want to see higher taxes, but because a failure to do so would be yet another sign that political leaders have lost any will to make difficult choices. It'd be a sign that the whole government is California, perpetually promising way more than it can realistically deliver.
More coverage from The Business Insider:
174 Comments
taopraxis - Tuesday June 30, 2009 01:55PM EDT
This is life under soviet-style government central planning, economic depression, a financial system rife with fraud, a debased currency, massive public and private debts, zero-bound interest rates, skyrocketing unemployment, falling incomes, record lows in industrial production and cap utilization, record foreclosures, record bankruptcies, fantastic increases in the money supply, perpetual wars, solipsism in place of science, narcissism in place of ethics, a mass market system that reflexively purges anything original...
Kelly P - Tuesday June 30, 2009 02:02PM EDT
Here's a crazy idea...how about LESS government..ergo, less taxes.
Art - Tuesday June 30, 2009 02:02PM EDT
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness. Prudence, indeed, will dictate that governments long established should not be changed for light and transient causes; and accordingly all experience hath shown that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same object evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security.
Ryan - Tuesday June 30, 2009 02:05PM EDT
When I say middle class I'm talking about people with incomes of $50k-$75k/yr or couples with incomes of $100k - $130k/yr. Why? they are in a higher tax bracket, but yet have more consuming taxes then poorer people, yet just almost just as much as wealthier people. So as a percentage of income there overall taxes are really high. Where are taxes. . . . think about it. Property tax, Sales tax, income tax, sin tax, fuel tax, capital gains tax, dividend tax, registration fee tax. and that is just the main ones. There are tons of hidden ones as well. This country is going in the wrong direction . . we need a system that is fair. . . everyone pays the same percentage as the next person. I don't know if I can take 3.5 more years of this crap.
samurai - Tuesday June 30, 2009 02:07PM EDT
cazm I please scroll the article without seeing the contant blinking bullcrap in the box where you chow the videos. it is quite annoying and a big reason I do ont like Yahoo
Yahoo! Finance User - Tuesday June 30, 2009 02:07PM EDT
I swear they post these articles just to get you rubes in a yank. Why don't you post an article decrying death or bad weather next.
Yahoo! Finance User - Tuesday June 30, 2009 02:08PM EDT
Ryan M, I don't know about "ALL taxes", but I can tell you as a matter of fact that the top 10% of wage earners in this country pays ~70% of the income taxes and earn ~47% of the wages. The middle class (top 25%-top 50% of wage earners) pay ~11% of the taxes in this country and earn ~20% of total wages. Please explain how the middle class is getting anything BUT an awesome deal on their taxes relatively speaking.
Art - Tuesday June 30, 2009 02:09PM EDT
The problem with strong central governments is that policy mistakes effect a large population. E.g. China built great walls and had cultural revolutions. The Soviet Union had its boon doggie five year plans. The great society failed in the U.S. Europe has always been made up of relatively small independent countries benefiting from competing against each other. e.g. New world discoveries. The mistakes currently being made by the Obama administration will impact us all.
Ray - Tuesday June 30, 2009 02:09PM EDT
Summer is a good time to take a vacation and spend our stimulus money. Big business is continuing to go world wide. Over time they are no longer going to provide benifits, retirement plans, health care insurance and high wages for the average employees. Goverments will take over the benifits programs and business leaders will take the profit.
wayne - Tuesday June 30, 2009 02:11PM EDT
No more for goverment programs for the poor. We don't have the luxury of supporting people who have not planned for their own care. No government sponsored health care at public expense. The poor and infirm will overwhelm us all, and we will become another third world country. Those of us who are productive and carry our own weight have no responsibility to help those who will not help themselves. If we wish to be charitable and help those who cannot help themselves, then that should be our right but not our obligation.
Yahoo! Finance User - Tuesday June 30, 2009 02:12PM EDT
Yahoo..more taxes for the rich! We who are unemployed will escape the high taxes- Go Obama Go Obama. They only people who can pay taxes are the CEOs of America. Since they have moved all our jobs over seas, there is no left to tax!
Yahoo! Finance User - Tuesday June 30, 2009 02:14PM EDT
ryan M, Property taxes are MUCH higher per square acre in wealthier areas, a Sales Tax is a consumption tax which clearly taxes higher income people who consume more, capital gains and dividend taxes are both aimed straight at the hears of the wealthy (who have more money in the markets)....I'm sorry, but once you add in the "other" taxes, it skews even further toward a more progressive tax on the wealthy.....certainly not on the middle class. I can tell you that every wealthy guy in America would be thrilled to sign on to your "everyone pays the same percentage" concept which would really hit the middle class where it counts.
Yahoo! Finance User - Tuesday June 30, 2009 02:16PM EDT
Once upon a time a dashing Highwayman began to worry about his future, robbery being a very dangerous game. He didn't want to give up his easy life and go to work, but he also did not want to end up like most highwaymen. There had to be a better way. The Highwayman was a very likeable fellow, and he began to talk to the people around him. He pointed out that a certain group of Other people had what he wanted and that, really, the people wanted it, too. He told them that there were 19 of them for every one of the Others and that if they helped him he would take what they wanted. But the people were troubled, they had always been honest, up-standing citizens and this sounded a little like, well, robbery. So the Highwayman pointed out to them that they could claim innocence for themselves, too, and decide that the others were really the guilty. Thus reassured, the people joined the Highwayman and took for themselves the property which belonged to the Others. The sad part of this story is that it is true and that it happened in America, the great bastion of freedom and free men ... and that the Highwayman, who repeated over and over without shame that the 95% should take from the 5%, was Barack Obama, who the people elected to be President of the United States of America. .... And no one ever stopped to wonder if one day the Highwayman might not come for them.
Yahoo! Finance User - Tuesday June 30, 2009 02:18PM EDT
I for one dont care. Either I spend it on whiskey and hookers or they do. Cant say Im any more entitled than them really.
WolfTalk101 - Tuesday June 30, 2009 02:19PM EDT
I don't mind Obama (he what he is, a typical politician and an liar I mean lawyer) however I cant stand all his blind followers that still praise him to the nth degree. These people need to wake up and face the reality he can't give them a tenth of what he promised. And the only change he represents is superficial political party change which is really getting ridiculous. Real change would have been a 3rd party getting in office. Same political BS nothing new here. Next thing you will see are resident "fees" that way he is not raising taxes he will just invent fees to cover the difference.
CBW - Tuesday June 30, 2009 02:20PM EDT
Well, here's the CHANGE that was campaigned about! Little did all the idiots that voted for Obama know, it was going to eat their ass out too! Too bad the "educated" young people and the worthless freeriders have more say than those of us that actually care about the US and the principles it was buit upon. I wonder if the majority of the population even get it anymore. The governemntal koolaid has ripped the brain cells from most and therefore created an easy path to destruction!
Yahoo! Finance User - Tuesday June 30, 2009 02:23PM EDT
Ryan M - Tuesday June 30, 2009 02:05PM EDT ... The top 1% pay 40% of the income taxes in this country, the top 5% pay 60% of the income taxes in this country, and the yop 10% pay 70% of the income taxes in this country. How much do YOU think is THEIR fair share? And by the way, where did you get your definition of the Middle Class?
Yahoo! Finance User - Tuesday June 30, 2009 02:24PM EDT
The time for Americans to simply step up and refuse to pay taxes to the Unconstitutional Federal Government that has overthrown the Constitutional Republic is long overdue.
Yahoo! Finance User - Tuesday June 30, 2009 02:24PM EDT
Maybe the next currency will be a IOU written on a piece of paper with your signature?Isn't that what CA's going to do with the 24 billion deficit?
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Ryan - Tuesday June 30, 2009 01:48PM EDT
Once again the middle class pays more than their fair share, while the upper class doesn't pull its weight and the lower class gets a free ride. As a percentage of income, and ALL taxes, not just income tax. . . . the middle class gets screwed every time.