An economics professor from Stanford is warning Americans soon will discover a $163,000-per-family tax “bomb” inside President Obama’s budget plans, which have pushed U.S. deficits toward “banana republic levels.”
The alert comes from Michael J. Boskin, who praised some of Obama’s economic plans in a Wall Street Journal column but saw red flags waving for other provisions.
Boskin, a fellow at the Hoover Institution who chaired the Council of Economic Advisers under President George H.W. Bush, crunched the numbers and found that while Obama inherited a growing and significant budget deficit, his plans will add $6.5 trillion of debt.
“What does $6.5 trillion of additional debt imply for the typical family? If spread evenly over all those paying income taxes (which under Mr. Obama’s plan would shrink to a little over 50 percent of the population), every income-tax paying family would get a tax bill for $163,000,” he wrote.
“(In 10 years, interest would bring the total to well over a quarter million dollars, if paid all at once. If paid annually over the succeeding 10 years, the tax hike every year would average almost $34,000.) That’s in addition to his explicit tax hikes,” wrote Boskin.
“While the future tax time-bomb is pushed beyond Mr. Obama’s budget horizon, and future presidents and Congresses will decide how it will be paid, it is likely to be paid by future income tax hikes as these are general fund deficits,” he said.
“We can get a rough idea of who is likely to pay them by distributing this $6.5 trillion of future taxes according to the most recent distribution of income-tax burdens. We know the top 1 percent or 5 percent of income-taxpayers pay vastly disproportionate shares of taxes, and much larger shares than their shares of income. But it also turns out that Mr. Obama’s massive additional debt implies a tax hike, if paid today, of well over $100,000 for people with incomes of $150,000, far below Mr. Obama’s tax-hike cut-off of $250,000. … In other words, a middle-aged two-career couple in New York or California could get a future tax bill as big as their mortgage,” he warned.
Boskin notes that Obama’s administration did inherit a large deficit.
“All presidents present the best possible case for their budgets, but a mind-numbing array of numbers offers innumerable opportunities to conjure up misleading comparisons,” he said. “Mr. Obama’s characterizations of his budget unfortunately fall into this pattern. He claims to reduce the deficit by half, to shave $2 trillion off the debt (the cumulative deficit over his 10-year budget horizon), and not to raise taxes on anyone making less than $250,000 a year.
“While in a Clintonian sense correct (depends on what the definition of ‘is’ is), it is far more accurate to describe Mr. Obama’s budget as almost tripling the deficit. It adds $6.5 trillion to the national debt, and leaves future U.S. taxpayers (many of whom will make far less than $250,000) with the tab. And all this before dealing with the looming Medicare and Social Security cost explosion,” he said.
He said the Congressional Budget Office “baseline cumulative deficit” for 2010-2019 is $9.3 trillion. Obama’s proposals, he writes, add to that $6.5 trillion.
“Finally, what of the claim not to raise taxes on anyone earning less than $250,000 a year? … Every dollar of debt he runs up means that future taxes must be $1 higher in present-value terms. Mr. Obama is going to leave a discounted present-value legacy of $6.5 trillion of additional future taxes, unless he dramatically cuts spending. … Call it a stealth tax increase or ticking tax time-bomb,” he said.
Boskin praised Obama’s plans to permanently index the alternative minimum tax and other provisions, but he said the growing trillion-dollar deficits in the latter years of Obama’s plans “are so large for a prosperous nation in peacetime – three times safe levels – that they would cause the debt burden to soar toward banana republic levels.”
WND previously reported when Lawrence J. Haas, former communications director for Vice President Al Gore, said Obama “wants to make permanent all the tax cuts from those years [2001 and 2003] for people making up to $250,000 a year and frankly to redistribute income a bit in a fair way so he would raise taxes on those above $250,000.”
His comments came in an interview with Greg Corombos of Radio America/WND, and the audio is embedded here:
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Haas explained the income redistribution plan:
“The tax cuts from 2001 and 2003 provided a disproportionate amount of the benefits for those in the top one, two percent of earners, so in essence what the president is attempting to do is make things a little bit fairer by way of asking those who have done so well in recent years to pay a little bit more … [while continuing] tax relief for people at the bottom, in the middle, in all candor who have struggled in recent years.”
In a 2001 radio station interview, Obama said he thought wealth “redistribution” was appropriate:
If you look at the victories and failures of the civil rights movement and its litigation strategy in the court, I think where it succeeded was to invest formal rights in previously dispossessed people, so that now I would have the right to vote. I would now be able to sit at the lunch counter and order and as long as I could pay for it I’d be OK
But, the Supreme Court never ventured into the issues of redistribution of wealth, and of more basic issues such as political and economic justice in society. To that extent, as radical as I think people try to characterize the Warren Court, it wasn’t that radical. It didn’t break free from the essential constraints that were placed by the Founding Fathers in the Constitution, at least as it’s been interpreted, and the Warren Court interpreted in the same way, that generally the Constitution is a charter of negative liberties. Says what the states can’t do to you. Says what the federal government can’t do to you, but doesn’t say what the federal government or state government must do on your behalf.
And that hasn’t shifted and one of the, I think, tragedies of the civil rights movement was because the civil rights movement became so court-focused I think there was a tendency to lose track of the political and community organizing and activities on the ground that are able to put together the actual coalition of powers through which you bring about redistributive change. In some ways we still suffer from that.
