“I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increases,” the President told a crowd in Dover, N.H. on Sept. 12, 2008. “Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”
When Obama made that promise in 2008, my inclination was disbelief. However, I pondered the Bush Tax Cuts which were set to expire during Obama's Presidency and figured that he would allow those to expire, which would not count as "new" taxation. It would, however, constitute a tax increase on those making less than 250,000 per year. As I have watched the President spend money with alarming disregard toward the consequences, I have become convinced that taxes will be increased on the Middle Class. Senator Baucus removed any remaining doubt I had when he stated it was coming:
So there you have it. The pledge will be broken. Now the question is how much damage does the President plan on doing with his new found tax policy. One idea being floated is a Value Added Tax (VAT) which would not directly increase income taxes on the individual consumer, but would be a net tax on every consumable, taxed at each stage of the production process. Now the President used the words "will not see any form of tax increase..." So when the Bush Tax Cuts expire...that counts as a form of tax increase. If the VAT tax is adopted, that will be a "form" of tax increase. What other hidden nuggets of new taxes does the President have in store for us?
Forget Health Care and the coming VAT tax. Obama only lasted three months into his Presidency before raising taxes on Americans who earn less than 250K. Smokers felt the sting of a 62 cents per pack federal tax increase (the largest in history) which disproportionately affects the poor. I don't smoke, so this tax doesn't affect me. But it does show me that the President doesn't find the same meaning in the words "any form of tax increase" that I find. Any form means any form to me. And a cigarette tax is certainly a form of taxation.
This is where the President really left the reservation. The new taxes in the Health Care Bill could potentially be endless. Co-pays for prosthetics, mandatory insurance purchases, unfunded mandates that will force State's to raise taxes, a ten percent tanning bed tax (another tax that does not affect me), new health care taxes that will be passed on to consumers and limitations on tax shelters for health savings accounts that have a net affect of increasing tax burden. Another tax affect that has not yet affected me concerns tax deductions for medical expenses that exceed 7.5 percent of your income. Depending on your income and health ratio, that can be a high standard to meet as it is.
For people at the lower end of the middle class (especially those who are on several prescriptions), the mandated increase in the percentage to ten percent will act as a tax increase. If you are earning fifty thousand dollars per year, you can currently claim a deduction of 7.5 percent in medical expenses. So anything over $3,750 dollars is deductible. If your monthly insurance premium is matched by your employer and you are paying a reasonable four or five hundred dollars monthly toward your premium, you are already getting a tax benefit without co-pays and prescription expenses added in. If you average five or six thousand dollars in expenses per year, you are able to write off a couple thousand dollars. The increase to ten percent raises your obligation from $3,750 to $5,000. That may not seem like much, but it is money you can spend. AND it is a net tax increase.
Cap and Trade
This is a less-than-amusing power grab that concerns me for many reasons more than just taxation. But it is a hidden tax. First of all, the bill would cost energy companies a lot of money...which you can be certain will be passed on to the consumer. But in addition to the taxing of corporations, the Bill intended to apply to private residences as well. Yes, you heard correctly. The Bill was defeated, but it intended to create mandates for retrofitting buildings across the country (to California standards). This could create new taxation in the form of new building code requirements for home owners. There is not grandfather clause and the only consolation prize is (up to) a fifty percent matching "grant" from the Government. That is scary stuff. Although my home is already Energy Star compliant, I really don't want the government telling me what setting I can put my thermostat on.
The Cap and Trade Bill did not pass, but there is a disturbing trend in our current government. We have a President that has centralized power in a move that circumvents the Constitution of the United States. It is a scary power grab that Americans should be paying attention to. Our checks and balances created a system where the Congress, Supreme Court and President each had powers that kept the others in check. The President has already expressed his disdain for the Supreme Court and has continually circumvented Congress through the use of an endless parade of "Czars." In this instance, he has deemed the still Scientifically speculative "greenhouse gases" as an emission that should be monitored by the EPA, thus (potentially) setting into motion the exact standards the EPA was going to enforce through Legislation. In other words...it may still be coming...possibly just not as quick...and without the matching funds.
These are just a few examples of new taxes that have been enacted or could be coming. Tomorrow is tax day...I file early because I normally overpay. I overpay on purpose because I fear the additional fines for underpayment. I celebrated over the weekend, because I am not making money for myself. Tax Freedom Day is April 9, 2010 for this year. It takes that long for the fifty-three percent of us workers who actually pay taxes to start keeping our money. I don't begrudge anyone who cannot afford to pay not to have to pay them. In fact, I encourage that aspect of our tax system to allow the lower income brackets (which I spent many years in) to continue using their money to consume...that is part of the economy. But the free handouts, mandates and burgeoning government needs to be brought into check. We need major overhauls of the tax code and spending before the beast cannot be tamed.
I don't think anyone like taxes other than the legislative bodies that impose this form of payment :-) Having said that, taxes are essential for a government to balance its budget. A lousy government does a bad job of doing so, thereby having to increase its burden on its people. A good one manages to keep every aspect of life in perspective, thereby balances its income and expenditure. Very much like an individual. The major part of taxes collected by government … more
To tax (from the Latin taxo; "I estimate", which in turn is from tangō; "I touch"). Taxes are also imposed by many subnational entities. Taxes consist of direct tax or indirect tax, and may be paid in money or as its labour equivalent (often but not always unpaid). A tax may be defined as a "pecuniary burden laid upon individuals or property owners to support the government […] a payment exacted by legislative authority." A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" and is "any contribution imposed by government […] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name."
The legal definition and the economic definition of taxes differ in that economists do not consider many transfers to governments to be taxes. For example, some transfers to the public sector are comparable to prices. Examples include tuition at public universities and fees for utilities provided by local governments. Governments also obtain resources by creating money (e.g, printing bills and minting coins), through voluntary gifts (e.g., contributions to public universities and museums),by imposing penalties (e.g,, traffic fines), by borrowing, and by confiscating wealth (as communist governments often do when they sieze power). From the view of economists, a tax is a non-penal, yet compulsory ...