Howard Rich's Blog

July 2, 2009

Obama can’t delay breaking tax pledge

From the Washington Examiner:

Telling voters about a tax increase is like telling your spouse you strayed — there’s no good time or way to do it. But, as the governor of South Carolina continues to ably prove, some options are worse than others.

It’s no longer a question of if President Barack Obama will have to come clean about breaking his campaign promise not to raise taxes on families who make less than $250,000.

The president once believed he had a slick way to pay for universal coverage. First, he would lower the tax deductions for rich people who donate money to charities. Then, he could add the proceeds from global warming fees to cover the more than $600 billion he said his plan would cost.

But his cap-and-trade plan went from a revenue source to another expense as Democrats gave away the legislative farm to prevent an embarrassing defeat. Some 85 percent of the carbon credits will be giveaways to start. Plus, goodies like a $1 billion “green jobs” program to appease Rep. Bobby Rush, D-Ill., made their way into the 3 a.m. version of the bill that the House passed like a kidney stone last week.

Making charitable giving less appealing has proven to be unpopular in Congress, and even if it could get through, there just wouldn’t be enough money.

And with each passing day, the need for money grows.

The cheap health plan in Congress costs about $300 billion more than Obama’s initial estimate. The expensive plan that has the benefits the president likes costs more than twice as much as his original pitch.

Sen. Ted Kennedy’s health committee is trying to save the day with a government-run insurance plan that allegedly won’t cost the taxpayers. The until-recently secret strategy would have the first three years of free premiums for users be given as loans to be paid back over subsequent years. Kennedy’s proxy in the Senate, Chris Dodd of Connecticut, knows something about subprime lending so he must realize how silly it all sounds.

It seems the only way to pay for any plan is to tax the health benefits of workers — a proposal so terrifying to politicians that they will only talk about it in whispers, coming forward to say publicly that they are “open” to the idea, as if they were all trying to work up the courage to go skinny dipping.

Unlike the pass-along costs from charging companies fees for carbon emissions — perhaps $800 dollars a year per family — there is no way to avoid the tax label for the health plan. Obama, in a plug for his favorite bankrupt car company, says that he is only “open” to the idea of taxing “Cadillac” health plans valued at $17,000 or more a year. Since most families spend about $14,000 a year on care, the difference between a Chevy and a Caddy when it comes to health care isn’t so big.

But to get a plan generous enough to get the likes of Bobby Rush on board may cost even more than taxing middle-class health benefits can extract. There are other options — a national food tax or a value-added tax — that terrify lawmakers even more. They are so terrifying, in fact, that Democrats are even considering cutting Medicare.

If a member of Congress is talking about cutting a health program for elderly voters he is either scared, drunk, or Tom Coburn.

What only a canny few on Capitol Hill realize right now, though, is that health care plan or not, there will have to be more taxes. The deficit estimates continue to climb with each passing Congressional Budget Office report. The debt load is unsustainable. The Federal Reserve could devalue the currency to pay back foreign obligations with cheaper dollars, but that would destroy the economy even more than a new tax.

So a tax being inevitable, then, the question is when is the most politically advantageous time to drop the hammer.
A tax increase during an election year would be pure poison and all those but the far-Left in Congress would buck Obama, so it needs to happen soon.

Press secretary Robert Gibbs said this week: “We are going to let the process work its way through” when it comes to the effect of health care on new taxes. But that process will be a quick one.

As Mark Sanford has proven, the longer you wait to deliver the bad news, the worse it sounds.

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