United Liberty

Written by Ryan Ellis, Tax Policy Director at Americans for Tax Reform. Posted with permission from Americans for Tax Reform.

What are the top ten tax hikes in President Obama’s new budget?

There are literally dozens of new tax increases in the FY 2014 Obama budget.  In total, they increase taxes by nearly $1 trillion over the next decade.  They would permanently bring the federal tax burden to 20 percent of economic output, a level only reached in one year since World War II (FY 2000, when the economy was roaring and tax revenues were pouring into Washington as a result).

Below are the top ten tax increases in President Obama’s budget (all numbers are over a decade):

1. Chained CPI. The budget would change the definition of inflation for all federal budget purposes, including federal tax provisions.  Because tax brackets and other tax items are indexed to inflation, slowing down their growth is an income tax increase.  This is a tax increase for all Americans who pay income tax, including middle class Americans.  In the past, Congress’ Joint Committee on Taxation has estimated that enacted “chained CPI” would be a $100 billion tax increase

While they face tough odds to take control of the Senate next year, Republicans will no doubt set their sights on Sen. Mary Landrieu (D-LA) and she’s giving them plenty of ammunition to use in what could be an expensive, heated campaign.

In an interview with Politico, Landrieu stood behind her record and even suggested that she could support President Barack Obama’s gun control proposals, which will come before the Senate next month:

The Louisianian confidently voted last week for the Democratic budget with its $1 trillion in tax hikes. She was one of only 20 Democrats who favored keeping the medical device tax, an element of Obamacare that some Democrats have worked to abolish. Along with other Democrats, she backed a handful of amendments opposed by senators from conservative states restricting health care for immigrants and politically charged language to curb a cellphone assistance program.

“I do not scare easily,” Landrieu told POLITICO. “I think it’s in my DNA. I come from a family that feels very passionately and very strongly about public service and about trying to always find a balance and keep our eyes focused on representing the people and not getting too caught up in the politics of the day.”

For the first time since April 29, 2009, the United States Senate has passed a budget. Early this morning, the Senate finished voting on dozens of amendments and gave final passage to its version of the budget — which never balances and raises taxes by $1 trillion — by a vote of 50 to 49.

It was mostly a party-line vote, 48 Democrats and two Independents, both of whom caucus with the party in power, voted for passage. Four Democrats — Sens. Max Baucus (D-MT), Mark Begich (D-AK), Kay Hagan (D-NC), and Mark Pryor (D-AR) — joined all 45 Republicans in opposition. It just so happens that every Democrat who voted against the budget is up for re-election next year.

Sens. Tim Johnson (D-SD), Mary Landrieu (D-LA), Jeanne Shaheen (D-NH), Mark Udall (D-CO), and Mark Warner (D-ND) are also up for re-election next year. Their votes in favor of the budget will no doubt be brought up by their opponents.

Negotiators from the House, which passed its budget proposal on Thursday, and Senate will soon meet in a conference committee to try to reconcile their vast differences. Because they’re so far apart — with the House wanting a balanced budget in 10 years, tax reform, and entitlement reform and the Senate pushing $1 trillion in tax hikes and an perpetually unbalanced budget — agreement on a budget for FY 2014 looks unlikely.

We noted here during while Congress debating extending current tax rates that many Democrats had issues with a reduction in the planned increase of Death Tax in 2011. Instead of 35%, they wanted it at 45% - often resorting to class warfare to demagogue the issue. In the end, an amendment to increase the Death Tax in the deal worked out between President Barack Obama and Republicans failed, however, the class warfare rhetoric remains.

Russ Roberts, an economist and blogger at Cafe Hayek, explained his problems with the Death Tax from a different perspective in The New York Times:

A 2005 study of the estate tax by the Congressional Budget Office had this honest line: “Economic studies have had limited success in identifying how the estate tax may influence the behavior of farmers and small-business owners.”
[…]
More importantly, perhaps, as in many areas of economics, one’s assessment of the empirical work conveniently lines up with one’s philosophical attitudes toward government. So I won’t pretend my dislike for the estate tax is because it hurts capital formation, say, which it certainly might. But that’s not the main reason the estate tax bothers me.

Late last night, the House of Representatives passed extension of currents tax rates and unemployment benefits by a vote of 277 to 148, despite a failed effort by Democrats to increase the Death Tax from 35% to 45%:

A tax-cut compromise between President Barack Obama and congressional Republicans – a harbinger of a new era of divided government in Washington – cleared the House around midnight Thursday, sending the $858 billion bill to the president’s desk.

The bill, which passed 277 to 148, provides a two-year extension for all tax cuts that were due to expire Dec. 31 – including for families earning more than $250,000 a year — and extends unemployment insurance benefits through next year. It also sets estate tax rates at 35 percent, with an exemption on the first $5 million.

In the end, the House vote wasn’t close, with 139 Democrats joining 138 Republicans to approve the bill. The Senate passed the bill comfortably as well Wednesday, 81 to 19.

The bill represented a major shift for Obama, as he abandoned an oft-repeated campaign promise that he would end the policy of cutting taxes for the wealthy. But the House Republican landslide in the midterm elections – a “shellacking,” Obama called it – forced the president to cut a deal so middle-class families didn’t see a tax hike on his watch, even though it infuriated his liberal base.

The rhetoric on the floor of the House was testy at times, but in the end 139 Democrats voted for extension of the tax cuts, which is one more than the number of Republicans voting for the bill.

By a vote of 81 to 19, the United States Senate has passed the tax deal between President Barack Obama and Republicans, which will extend the 2001 and 2003 tax cuts, unemployment benefits and tax credits and enact a one-year payroll tax holiday.

The package will now move on to the House where it will likely be taken up tomorrow. It’s unclear whether or not House Democrats will be able to make the desired changes to the Death Tax; they deem a 35% take rate to be “too generous.”

The 19 “no” votes are:

• Jeff Bingaman (D-NM)
• Tom Coburn (R-OK)
• Jim DeMint (R-SC)
• Byron Dorgan (D-ND)
• John Ensign (R-NV)
• Russ Feingold (D-WI)
• Kirsten Gillibrand (D-NY)
• Kay Hagan (D-NC)
• Tom Harkin (D-IA)
• Frank Lautenberg (D-NJ)
• Patrick Leahy (D-VT)
• Carl Levin (D-MI)
• Jeff Merkley (D-OR)
• Bernie Sanders (I-VT)
• Jeff Sessions (R-AL)
• Mark Udall (D-CO)
• Tom Udall (D-NM)
• George Voinovich (R-OH)
• Ron Wyden (D-OR)

As action nears in the House on the tax compromise between President Barack Obama and Republicans, another Republican is expressing dissatifaction with the arrangement:

Count a future GOP committee chair as one of those icy on President Barack Obama’s tax compromise with Republicans.

California Rep. Darrell Issa, the future chair of the House Oversight and Government Reform committee, said the tax bill that passed a key procedural hurdle Monday is “an incomplete effort that fails to create a permanent tax structure giving businesses the kind of long-term predictability needed to support investment, economic growth and job creation.”

Issa isn’t yet saying he’ll vote against it and even concedes that it avoids “massive and immediate tax increases that would harm our economy and kill more jobs.”

“While my vote will ultimately depend on the final bill brought to the floor of the House, the flawed last minute consideration of this proposal underscores the need for Congress to act decisively in the new year to support job creation, curb government spending and enact permanent tax reform,” Issa said in a statement to POLITICO.

The Senate voted for cloture yesterday, an important step to passing a two-year extension of current tax rates (with some sweetners for members to help ensure passage):

The proposal to extend the Bush-era tax rates will proceed.

The Senate reached the 60 votes needed to move forward with President Obama’s $858 billion plan to extend the current income tax rates Monday afternoon. It ultimately passed 83-15.

The measure would extend the Bush-era tax rates for two years in return for a 13-month extension of federal unemployment benefits. The package also will set the estate tax rate at 35 percent for assets beyond $5 million.

Five Republicans, nine Democrats and one independent have cast dissenting votes, including Vermont independent Sen. Bernie Sanders, who spent more than eight hours on the Senate floor last Friday railing against the deal. Nevada Sen. John Ensign, who joined Republicans Oklahoma Sen. Tom Coburn, South Carolina Sen. Jim DeMint, Alabama Sen. Jeff Sessions and Sen. George Voinovich of Ohio to vote against cloture, has said he opposes the measure because the unemployment benefits in the package are not paid for.

A slate of liberal Democrats who have staunchly supported a tax increase for the wealthy also supported the vote to move toward final passage. New York Sen. Charles Schumer, Michigan Sen. Deborah Stabenow and Rhode Island Sen. Sheldon Whitehouse, all fierce opponents of the Bush tax rates, cast a “yea” vote.

Despite tough talk by House Democrats on the $858 billion tax deal brokered between President Barack Obama and Republicans, it appears that it will come to the floor for a vote after all - though they are taking issue with the plans to knock the increase in the Death Tax from 35% instead of the planned increase to 55%:

The assistant to Speaker Nancy Pelosi (D-Calif.) said Sunday that President Obama’s tax compromise with Republicans will come to the House floor, despite House Democrats vowing to block the deal in a heated caucus meeting last week.

But Rep. Chris Van Hollen (D-Md.) said on “Fox News Sunday” that, even though the White House has said that the deal to extend the Bush-era tax cuts isn’t open to negotiation, House Democrats are still going to make an effort to lop out at least one controversial provision: the estate tax.
[…]
He insisted that Senate Republicans, in striking the deal with the president, had not insisted on a provision of setting the tax of 35 percent on estates over $5 million as a “central portion of this deal.” Many Democrats are furious about the rate and want a 45 percent levy on $3.5 million estates and greater.