President Obama’s proposed budget is unique in at least one respect: it calls for the largest tax increases in U.S. history. At least ten separate tax increases are included in the document, estimated by the Treasury Department to raise $1.7 trillion in new annual revenue, and by independent analysts at $2 trillion. It includes the familiar proposal to raise the tax rates on those single persons earning over $200,000 per year and married couples earning over $250,000. But there are a wide range of other proposals, ranging from the $7.50 fee commercial airline passengers would be required to pay to a new 3.8% surtax on investment income, higher taxes on dividends and capital gains, a new tax on corporate funds held overseas, and many others.
The document is really not a budget and Senator Reid, the majority leader, has stated that he will not bring it to the Senate for a vote. It is a political statement which expresses the general tenor of the President’s reelection platform and therefore, the platform of his party. The President foresees sharply higher taxes as the driver and fiscal support of his ambitious economic program for the next four years.
The proposed budget attempts to tap into a vein which is apparent in other countries. In many parts of Europe there is a wave of resentment against the rich which is feeding a rash of targeted tax increases against the wealthy. In France, the Socialist Party candidate for President announced his major initiative around the same time the Administration released its proposed budget. The candidate, Francois Hollande, called for a 75% tax bracket for those earning over $1 million euros a year. Earlier he proposed a higher marginal rate of 45% for those earning over $150,000 euros a year. Other European countries have initiated severe tax increases including those on income even as their economies have continued to struggle. Corporations also have been hit hard. Italy has initiated a “Robin Hood” tax aimed at the energy sector.
The Administration’s budget is not a growth initiative. To the extent that they are actually implemented, tax increases would impair the promising revival of our economy which is now underway. In a wider context, the sheer size of proposed tax increases foretells the Administration’s desire for a continuation and expansion of the big government solution.