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Obama Debt Commission Proposes

$1 Trillion in Net Tax Hikes--Stated Tax Revenue Target Would Set All-Time Record--

November 10, 2010Contact: Ryan Ellis, ATR Tax Policy Director:rellis@atr.org

Today, President Obamas Simpson-Bowles debt commission chairmen released apreliminary report. It confirms what everyone has knownthis commission is merelyan excuse to raise net taxes on the American people. Support for the commissionchair plan would be a violation of the Taxpayer Protection Pledge which over 235Congressmen and 41 Senators have made to their constituents.

ATR President Grover Norquist submitted testimony to the commission over thesummer. These spending cuts would have balanced the budget without raising taxes.

By its own admission (page 11), the report calls for a ten-year net tax hike of $961billion, nearly a $1 trillion tax increase over the decade. The stated goal of the report is to raise the long-standing historical level of federal

revenues from its average of 18 percent of GDP to 21 percent of GDP. According toPresident Obamas own Office of Management and Budget, federal revenues havenever been this high, and their data pre-dates World War II.

The report deceptively calls their net tax hikes spending in the tax code. There is nosuch thing, unless you assume the government has a right to all your money, and whenthey cut your taxes this is the same thing as spending money on you.

Additionally, the report calls for a tax hike trigger to take effect if Congress fails toenact comprehensive tax reform. This trigger would take the form of a 10 percentreduction in the mortgage interest deduction, charitable contribution deductions,the exclusion for employer-provided health insurance, and a host of other taxdeductions and credits. This haircut would grow over time, eventually leading tountold trillions of dollars in tax hikes.

The gas tax would be raised by $0.15 per gallon beginning in 2013. All this moneywould be spent on union-dominated Davis Bacon construction projects. An Americanfamily with a 15-gallon tank who fills up weekly would see a tax hike of $117 per year.

Theres a stealth tax hike which involves slowing down how fast tax brackets adjust toinflation. Over time, American families would find themselves in higher tax bracketsthan they otherwise would. Bracket creep would begin to once again rear its uglyhead.

Not counted in the $1 trillion tax hike is an expansion of the Social Security taxable wagebase. Under current law, only the first $106,800 in wages and net income from self-employment are taxable. The report calls for the Social Security taxable wage baseto gradually increase to nearly $150,000 (in todays dollars) by 2050. This increasesthe marginal tax rate on work by 12.4 percentage points for workers in this income range.

Finally, the report calls for an automatic tax increase in any year that the budget isout of balance.