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.