Daily Archives: August 5, 2009

Richard Posner wonders how tightly Obama is bound by his campaign promise not to raise taxes “by one cent” for people earning less than $250,000.

The President is a lawyer. Lawyers are masters of equivocation. Perhaps what has been taken off the table is just increases in income tax rates until the economy recovers from the current depression. Perhaps the door has been left ajar for other forms of tax increase, such as a federal value-added tax; cutting deductions (which do not affect the nominal tax rate); and increasing federal income tax rates in a year or two, when (one hopes) the Gross Domestic Product will have returned to its trend line.

Obama cast the commitment more widely than income taxes.

During the 2008 presidential campaign, Obama said over and over that the middle class — which he defined as anyone making less than $250,000 — would not face any tax increase.

“If you make under $250,000, you will not see your taxes increased by a single dime. Not your income tax. Not your payroll tax. Not your capital gains tax. No tax,” he said at a campaign event in 2008.

Perhaps, as Posner mentions, there is more scope for evasion on the timing, though so far as I know Obama never limited his promise to the duration of the recession.

Certainly middle-class taxes need to rise. That much is beyond dispute. And in fact Obama is already chipping away at the commitment. Taxes would rise at firms that did not provide health insurance under reform proposals he has endorsed. True, that would be a rise in the employer’s tax rather than the employee’s, but that is of no real significance: take-home pay would fall just the same. The individual penalty for failing to comply with a health insurance mandate is also a kind of tax. So is the rise in energy prices under cap and trade, another policy he has endorsed.

In the end, he is going to have to break his promise explicitly and the sooner he comes clean about that the better. My advice (see here and here, for instance) would be, wrap it up in comprehensive tax reform. Put the whole broken tax code on the table. My biggest fear for the US economy is that he will spend too long, ultimately in vain, trying to keep his word. That way lies fiscal ruin.

Clive Crook’s blog

This blog is no longer updated but it remains open as an archive.

I have been the FT's Washington columnist since April 2007. I moved from Britain to the US in 2005 to write for the Atlantic Monthly and the National Journal after 20 years working at the Economist, most recently as deputy editor. I write mainly about the intersection of politics and economics.

Clive Crook’s blog: A guide

Comment: To comment, please register with FT.com. Register for free here. Please also read the FT's comments policy here.
Time: UK time is shown on Clive's posts.
Follow the blog: Links to the Twitter and RSS feeds are at the top of the blog.
Schedule: Clive's column appears in the FT on Mondays and you can read an excerpt of it on this blog.
FT blogs: See the full range of the FT's blogs here.

Archive

« Jul Sep »August 2009
M T W T F S S
 12
3456789
10111213141516
17181920212223
24252627282930
31