Obama Administration Floats Across-the-Board Tax Increase

August 3, 2009

President Obama pledged during the campaign not to raise “any form of” tax on “middle class Americans,” which he defined as those making less than $250,000 per year. Although the cigarette tax increase he signed into law in February hits almost exclusively low-income individuals, he continues to reaffirm his campaign pledge (“I haven’t signed a bill that’s raised taxes yet,” 7/29/09).

Maybe not for much longer. Some administration officials are floating a trial balloon about broad-based tax increases:

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.”

Personally, I always found it interesting that the rhetoric of a liberal revolution was side-by-side with the rhetoric of tax cuts for most people. In essence, President Obama seems to have won support for expanding government programs by promising that most people won’t have to pay for them. Free lunches are indeed popular, but they’re also unsustainable over time. It’ll be interesting to see where the Obama Administration goes with this.

Tax.com speculates that it’ll be a VAT.

UPDATE 7:54 PM: The Obama Administration shoots down its trial balloon:

“The president was clear during the campaign about his commitment on not raising taxes on middle-class families,” White House press secretary Robert Gibbs said Monday afternoon. “I don’t think any economist would believe that, in the environment that we’re in, that raising taxes on middle-class families would make any sense.”

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