Obama’s hidden budget strategy

March 7, 2011

The great Jim Capretta reveals all at NRO. Here is a bit, but read the whole thing:

The Congressional Budget Office (CBO) says the total tax hike over the next ten years will exceed $800 billion — a significant sum. But that’s really just the beginning of it. The authors of Obamacare were looking for a “game-changer” that went beyond a near-term tax hike. …  Their solution: Go back to 1970s-style bracket creep. … The Obamacare tax hikes associated with Medicare — 0.9 percent on wages and 3.8 percent on non-wage income — were sold as hitting only individuals with incomes exceeding $200,000 and couples with incomes above $250,000 annually. But those income thresholds are fixed. … . Consequently, as the years go by, more and more Americans will find themselves paying much higher federal taxes for Medicare — even though they are decidedly not the “rich” people the president said he was targeting.

Similarly, the so-called “Cadillac” tax on insurance plans — sold as a way to hold down costs in the most expensive arrangements — will quickly become a tax that nearly everyone in America pays. In 2018, when the tax goes into effect (conveniently after President Obama has exited the scene), insurers and employers offering plans with premiums exceeding $27,500 for family coverage will pay the tax. But in 2019 and beyond, that threshold will not grow with medical inflation. Instead, it will increase only with economy-wide consumer prices, generally a few percentage points below the inflation trend in the health sector. As the years go by, therefore, virtually all health-insurance plans will start bumping up against the “high-cost” tax t

By 2020, the total tax hike associated with Obamacare will already be bad enough — about 0.5 percent of GDP. But by 2035, because of bracket creep, it will have more than doubled — to 1.2 percent of GDP, according to CBO. And it won’t stop there. It will keep going up every year, in perpetuity.

The piece is a good reminder how the center-left consensus is that Americans are wildly undertaxed, and that dramatic tax increases must be part of the fiscal fix.  So transparency is to be avoided at all costs.  Another reason why tax simplification is not just about making it easier for folks to fill out their taxes.

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