Higher Middle Class Taxes
Looks like the Obama Administration is testing the waters on the idea of raising taxes on the middle class,
WASHINGTON (AP) — President Barack Obama’s treasury secretary said Sunday he cannot rule out higher taxes to help tame an exploding budget deficit, and his chief economic adviser would not dismiss raising them on middle-class Americans as part of a health care overhaul.
Treasury Secretary Timothy Geithner and National Economic Council Director Larry Summers both sidestepped questions on Obama’s intentions about taxes. Geithner said the White House was not ready to rule out a tax hike to lower the federal deficit; Summers said Obama’s proposed health care overhaul needs funding from somewhere.
“There is a lot that can happen over time,” Summers said, adding that the administration believes “it is never a good idea to absolutely rule things out, no matter what.”
Of course, raising taxes would mean that President Obama not going to keep his promise of not raising taxes on the middle class. This shouldn’t come as a big shock as he has already raised the cigarette tax, which means higher taxes on people in the middle class. Also, President Obama has gone back on his promise not to raise taxes on those making over $250,000 above the Clinton era tax levels.
“If we want an economy that’s going to grow in the future, people have to understand we have to bring those deficits down. And it’s going to be difficult, hard for us to do. And the path to that is through health care reform,” Geithner said. “We’re not at the point yet where we’re going to make a judgment about what it’s going to take.”
Well sort of. This is really actually political spin. One reason why higher deficits today can mean lower growth in the future is that there may very well be higher taxes in the future. Of course, there is also the interest rate issue as well and crowding out. These also reduce growth. And lets be clear, the reason why it is going to be hard is because President Obama and his Administration have run up the deficit quite a bit. They have spent lots of money and have promised to spend quite a bit more as well.
Update: Commenter Sam points to this press conference with Robert Gibbs denying that there is some possibility of a tax increase on the middle class.
WASHINGTON – The White House spokesman says President Barack Obama is committed to not raising taxes on U.S. families earning less than $250,000.
Robert Gibbs restated that assurance Monday after two top White House officials suggested over the weekend that they could not rule out tax increases as the administration struggles to cut the budget deficit in half in the coming years.
Well of course unless you’re a smoker, but then you’re icky anyways.
Commenter Rick Almeida asks,
Did Obama really promise not to raise taxes on those making over $250,000, beyond letting the Bush-era tax cuts expire?
Sen. Obama believes that responsible candidates must put forward specific ideas of how they would pay for their proposals. That is why he would repeal a portion of the tax cuts passed in the last eight years for families making over $250,000. But to be clear: He would leave their tax rates at or below where they were in the 1990s.
– The top two income-tax brackets would return to their 1990s levels of 36% and 39.6% (including the exemption and deduction phase-outs). All other brackets would remain as they are today.
This was written by Jason Furman and Austan Goolsbee, both were working for the Obama campaign. It is clear that this was something approved of by then Candidate Obama.