The Coming Middle Class Tax Hike
While President Barack Obama is pushing to extend current tax rates for the middle class, one thing that hasn’t been mentioned much by the media is that the measure is only temporary. That’s right, folks. It’s a one-year extention. On January 14, 2014, tax rates for the middle class will increase, as James Pethokoukis explains:
recall what liberal journalist Noam Scheiber wrote in his recent book, The Escape Artists: How Obama’s Team Fumbled the Recovery.
Scheiber reveals that in the fall of 2009, Obama’s chief congressional lobbyist hatched a plan to extend the middle-class Bush tax cuts for two years while letting the upper-income tax cuts expire on schedule.
If Congress couldn’t devise a way to pay for the $2.3 trillion extension of the middle-class cuts, they would all expire in 2015. Schiliro easily sold White House budget director Peter Orszag on the idea. “[Orszag] believed the only practical way to balance the budget was to repeal all the Bush tax cuts, not just the upper-income variety.”
Orszag then presented the plan to Obama:
… the administration’s chief wonk—Barack Obama—was intrigued. He asked a series of encouraging questions about how the proposal would work. According to two sources in the room, he was taken with both the political merits—that is, putting Republicans on the defensive—and the policy rationale of lopping trillions off the deficit. He gave no indication that he was troubled by the plan’s most explosive feature: that it would likely break a central campaign promise—not raising taxes on the middle class—one Republicans would surely wrap around his neck with populist glee.
The White House political team and Vice President Joe Biden eventually helped kill the idea. Intriguingly, however, Scheiber thinks that if Obama is reelected, letting all the Bush tax cuts expire—which will happen automatically if Congress does nothing—”may simply be too tempting to pass up.” As Scheiber explains:
What is clear is that, having been tempted to end all of the Bush tax cuts in 2009, the president would only find the idea more attractive were he to win a second term. At that point, he will never again stand before the voters, at least not as a presidential candidate. There would be nothing to stop him from flouting a campaign promise, even one as sensitive as his tax pledge.
So I think it is significant that Obama is calling for just a one-year extension of the middle-class BTC and permanent expiration of the rest. The middle-class may catch a break in 2013 if Obama is reelected, but they might want to start saving for their 2014 tax bill.
This is the dirty little secret, one that During a recent event at the Center for American Progress, House Minority Whip Steny Hoyer (D-MD) noted that lowering the income threshold from $250,000 is something he’d consider:
Of course, this isn’t the first time that Hoyer has said that he’d be willing to raise taxes on the middle class. Back in June 2010, Hoyer was very open to raising taxes on the middle class. Based on the fact that President Obama is pushing extension of tax rates for one year, that tells me that Hoyer’s sentiment is probably shared by more than just a few Democrats in Congress.
While polls may show support for raising taxes on the evil, hated “rich”; the middle class had better brace themselves for a tax tsunami in 2014.