On the heels of the widespread exposure of President Obama’s health care law as a massive middle-class tax hike, bringing back his infamous broken promise about tax hikes supposedly beinglimited to incomes over $250,000 is a blunder.
Most voters will doubt the tax hikes will in fact be limited to the rich – and for good reason, because the president has already repeatedly raised middle-class taxes. In this case, middle-income Americans who built up value in a home their entire lives will be “rich” according to Obama in the one year they sell that home – and subject to a hefty tax hike.
The impact of not canceling the tax hikes on capital gains and dividends, in particular, will have a widespread effect far beyond the initial incidence of the tax. That’s because the dividend tax hike – a near tripling from 15 percent to 43.3 – will trigger a massive stock market sell-off that will wallop the retirement accounts of people of all income levels.
With deteriorating economic fundamentals, many voters are concerned with finding jobs or keeping the ones they have. So a huge tax hike on small businesses – who comprise the overwhelmingly majority of upper-income individual tax filers – will impact not just businesses but every worker on the margin of being hired or laid off.
Allowing the death tax to jump from its current 35 percent rate above $5 million to a confiscatory 55 percent rate above $1 million will put a lot of family businesses and farms out of business. It’s also one of the most hated taxes of all, making his plan even more politically problematic for vulnerable Senate Democrats.
The bottom line is the smart economic and political play was to say no more tax hikes this year, period. Now we have to watch another Washington game of chicken with the U.S economy teetering in the balance. Obama failed another test of leadership.
Originally appeared in Politica Arena.
Obama’s latest tax hike blunder
