If you thought the Obama economic policy was coherent, think again. Before we even get to phasing out the lower tax rates from the Bush tax cuts, the Obama team is going to raise taxes — by a lot. This report explains:
The tax increases would raise an estimated $318 billion over 10 years by reducing the value of such longstanding deductions as mortgage interest and charitable contributions for people in the highest tax brackets. Households paying income taxes at the 33% and 35% rates can currently claim deductions at those rates. Under the Obama proposal, they could deduct only 28% of the value of those payments.
So we just spent $787B to stimulate the economy and now we are going to begin sucking money out of the economy. Some (okay, everyone) would conclude that we are acting as cross-purposes, adding stimulus with one hand and taking it away with the other.
In short, this is a hefty surtax on upper wage earners, without the transparency of a rate hike which would make clear how dramatic the tax grab is.
But in an effort to disguise the tax hike by adjusting deductibles rather than heading straight for the rates, the Obama team will be taking a whack at both charities and the home industry (yes, the same industry he now must massively subsidize):
One concern certain to get attention in Congress: whether a change to the deductions formula would discourage charitable giving among the wealthy, or further depress the housing market given that the interest deduction would fall for some.
Even Steny Hoyer has figured this out.
This reveals how little concern the administration has for the most urgent matter at hand: reviving the economy. In their rush to enact the Great Society II they are running roughshod over the investors, homeowners, and charitable givers whose money we need to weather the storm. But the Obama team can’t be bothered with mundane matters like economic growth. They have a society to remake.