Tax Analysts Blog

Obama Adopts Reagan Tax-Hike Tactics

Posted on Aug 6, 2009

Karl Rove’s Wall Street Journal columns often are nothing more than well-informed rants about why conservatives should hate the Obama administration more than they already do. But in today’s installment “The Architect” of President Bush’s 2000 and 2004 campaigns gives the White House some well-deserved criticism.

He starts by highlighting the dispute in the White House between the political and economic teams—the same dispute Ruth Marcus wrote about in her Washington Post column yesterday. Then Rove succinctly lays out the contradictions in Obama’s tax policy:

    The economic team awakens each day worried about reconciling two irreconcilable realities: The administration’s budget calls for huge, sustained new government spending, which threatens giant budget deficits. Being liberals, the economic team is inclined to raise taxes, not cut spending.

    The campaign team is intent upon protecting a pledge driven by its 2008 campaign polls: Mr. Obama promised never to raise taxes on anyone making less than $250,000 a year to avoid being labeled a tax-and-spend liberal.

    Even so, Mr. Obama has already broken his no-new-taxes pledge. On Feb. 4, Mr. Obama signed a $33 billion cigarette tax increase, which fell disproportionately on lower- and middle-income individuals. And the “cap and trade” energy bill, approved by the House on June 26, is a tax on anyone who owns a light switch, uses a car key, or has bought anything manufactured, shipped or sold in the U.S.

    The House version of Mr. Obama’s health-care—excuse me, “health-insurance”—reform already has four taxes that will largely be paid by people making less than $250,000 a year. There’s $8.2 billion in taxes for using health savings accounts and other tax-free medical savings vehicles to purchase over-the-counter drugs. There’s an 8% tax on employers who don’t offer insurance: The Congressional Budget Office says workers in those businesses would pay the $163 billion cost via lost wages.

    There’s a 2.5% “Tax on Individuals Without Acceptable Health Care Coverage” in the House bill that applies to people who either don’t have insurance or whose policies the government deems inadequate. Finally, there’s a $2 billion “Comparative Effectiveness Research Tax” on all private and “public option” insurance policies.


This denial that tax increases are tax increases is reminiscent of the 1982-84 era. Then a popular president facing huge deficits used every rhetorical trick in the book to preserve his reputation as a tax cutter even as he signed three major tax increases into law three year in a row--the Tax Equity and Fiscal Responsibility Act of 1982, the Social Security Amendments of 1983, and the Deficit Reduction Act of 1984.

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