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April 03, 2009

Obama's Future Tax Hikes

That budget Congress passed yesterday? This is the result:

Finally, what of the claim not to raise taxes on anyone earning less than $250,000 a year? Even ignoring his large energy taxes, Mr. Obama must reconcile his arithmetic. Every dollar of debt he runs up means that future taxes must be $1 higher in present-value terms. Mr. Obama is going to leave a discounted present-value legacy of $6.5 trillion of additional future taxes, unless he dramatically cuts spending. (With interest the future tax hikes would be much larger later on.) Call it a stealth tax increase or ticking tax time-bomb.

What does $6.5 trillion of additional debt imply for the typical family? If spread evenly over all those paying income taxes (which under Mr. Obama's plan would shrink to a little over 50% of the population), every income-tax paying family would get a tax bill for $163,000. (In 10 years, interest would bring the total to well over a quarter million dollars, if paid all at once. If paid annually over the succeeding 10 years, the tax hike every year would average almost $34,000.) That's in addition to his explicit tax hikes. While the future tax time-bomb is pushed beyond Mr. Obama's budget horizon, and future presidents and Congresses will decide how it will be paid, it is likely to be paid by future income tax hikes as these are general fund deficits.

Basically, in just over 60 days, Obama and the Democrats have ensured that your taxes and the taxes of your children will rise. Dramatically. And the media continues to allow him to get away with brushing off those concerns with his stock, ridiculous "inherited a deficit" answer. Perhaps, in between the slobbering coverage of Michelle's dresses and the adoring European crowds, a member of the press can get around to asking someone in the administration about how crushing debt will ensure the sort of prosperity Obama promises?

(H/t: Mankiw)


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posted by Slublog at 08:32 AM

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