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War Tax Bill Proposed by Congressman Obey

2 min readBy: Gerald Prante

Today, Congressman David Obey (D-WI), Chairman of the House Appropriations Committee and a vocal critic of the current war in Iraq, has put forth a proposal to impose a war taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. on the American people. From Fox News:

A top Democratic congressman, saying Democrats “have had it with being maneuvered and jerked around” on the war in Iraq, offered another approach Tuesday to change the course of funding for the ongoing war: A war tax.

Rep. David Obey of Wisconsin, chairman of the House Appropriations Committee, said he will not allow a bill to come for debate to provide emergency supplemental funds for the war and suggested Americans should be compelled to pay for it through a “surtaxA surtax is an additional tax levied on top of an already existing business or individual tax and can have a flat or progressive rate structure. Surtaxes are typically enacted to fund a specific program or initiative, whereas revenue from broader-based taxes, like the individual income tax, typically cover a multitude of programs and services. .”

“The president isn’t going to get a supplemental this year. I am not going to report a supplemental out” if it simply is a request for funds and not a change in direction for troops in Iraq,” Obey said.

He suggested he is flexible as to what the change in policy proposes “so long as it represents real change and not camouflage.”

Obey said the annual cost for the war could be paid by a tax that would range from 2 percent for low and middle income folks to 12-15 percent for higher income households.

It is true that one way or another, the war must be paid for. The question is: Who should pay for it? A deficit today to fight the war in Iraq means higher taxes tomorrow. However, assuming there is some net benefit from continuing the war in Iraq (outside of the direct financial costs), one could argue that the current generation of taxpayers should not have to assume the entire cost as the benefit would theoretically be received by future generations as well.

On the other hand, if the current generation cares about its offspring in the same way it cares about itself, then Richardian/Barro equivalency would merely say that the method of paying for it today–through either higher taxes or higher deficits–is irrelevant as the two are equivalent.

Finally, it is worth noting that if Obey were to be successful at imposing a 15 percent surtax on income earned by high-income individuals, the top statutory marginal tax rateThe marginal tax rate is the amount of additional tax paid for every additional dollar earned as income. The average tax rate is the total tax paid divided by total income earned. A 10 percent marginal tax rate means that 10 cents of every next dollar earned would be taken as tax. would be 50 percent.