In the build up to President Obama’s State of the Union address, the White House has floated plans to raise hundreds of billions in new taxes. The plans have almost no chance of passing Congress but are designed to frame the upcoming debates and alter the landscape for the presidential election in 2016.
The new package of tax hikes, intended to target the wealthy, would raise $320 billion over the next ten years, according to the White House. Added to the already enacted $600 billion in higher taxes, the new plan would push recent tax hikes to around $1 trillion. The combination would represent the largest tax hike in US history, even as the economy struggles to break out of its stagnation.
The majority of Obama’s new tax revenue would come from increasing federal inheritance taxes, often referred to as “death taxes.” Currently, estates less than $1,000,000 are exempt from federal taxes, which can take 55% of an estate value. Obama’s plan would lower that exemption to around $700,000, subjecting many in the middle class to the “death tax.”
President Obama’s plan would also increase the capital gains and investment income tax rate on high-income individuals and couples. The top rate on investment earnings and income would increase from 20% to 38%. The plan would also impose new taxes on financial firms that issue debt.
Obama plans to use this increase in federal revenue to underwrite costly new programs. A portion of the increased taxes would fund his plan to provide free community college tuition to most Americans. He would also boost a host of tax credits, providing income support to families with children, families where both parents work, and new education tuition benefits.
The unveiled plan is a sign that Obama will double-down on progressive economic policies, increasing taxes on the “wealthy” to provide benefits to others. It would increase the flow of money through the government, attempting to steer it toward desired outcomes.
The plan also reveals a very stunted view of how the economy works. Income inequality has exploded during Obama’s tenure in the White House, largely due to the easy money policy of the Federal Reserve which has injected trillions of dollars into the financial markets. At the same time, Obama administration policies have imposed new tax and regulatory burdens on businesses of all sizes while dramatically increasing the costs of labor.
Obama’s economic policies have never matured beyond the centuries-old conviction to take money from those who have it and redistribute it to some of those who don’t. Its a system to manage a perceived finite amount of resources, rather than implementing policies to grow the economy.
The bulk of Obama’s new proposal actually rests on a debate of how much of someone’s savings and investments the government should seize when they die. This is not a debate for a growing, dynamic society.
Obama is planning to use the upcoming State of the Union Address to frame the final two years of his presidency. Even Obama must realize that his time to set a mark on the nation’s trajectory is expiring. He is returning to the left’s trusted, decades-old playbook.
With the world economy teetering on the edge of a great contraction, and threats to global peace and security on a vigorous march, it is not a playbook to inspire confidence.