Tax-hiker in Chief takes on Social Security

J.D. Foster J.D. Foster is the former chief economist at the Office of Management and Budget and former chief economist and senior vice president at the U.S. Chamber of Commerce. He now resides in relative freedom in the hills of Idaho.
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There he goes again.  President Obama is proposing yet another huge tax hike.

Maybe we should cut to the chase and just ask our Tax-hiker in Chief to state his final figure — what he thinks the total level of taxes and the tax distribution should look like.  Then we could have an honest debate about tax burdens.  As it is, all we know for sure is that he wants more, more, and more, and that he believes that those who make the most cannot pay enough.

From the presidential campaign on, Mr. Obama has argued for higher taxes by way of letting tax relief enacted almost a decade ago expire.  He claimed he wanted to tax only the well-heeled, to help spread the wealth around.  This approach treats private wealth as public property, contravening both the principles of freedom and the prerequisites of prosperity.

And through deliberate inaction, Congress is about to let an even bigger tax hike take effect — one that will gouge the middle class, as well.  There’s no surprise here.  When this Congress was seated, every member knew taxes on all taxpayers would automatically rise unless members intervened.  Congress’ inaction is no accident but rather the deliberate strategy of Pelosi-Reid congressional leadership.

While reiterating that he only wants to raise taxes on the wealthy, Mr. Obama seems anxious to take the extra cash.  He could have pressed Congress to act earlier.  He could have defended the middle class against the tax hike.  Instead, he chose to play a silent role in the political theatre destined to let all the 2001/2003 tax relief expire.  This will be Obama’s tax hike, and it’ll be a whopper.

But that’s not all.  He also was perfectly happy to sign Obamacare into law with its new 3.8 percent income tax surcharge on capital income for those earning more than $250,000.  This hike raised $210 billion of the total $508 billion of tax hikes in Obamacare.

The president says he is not anti-business, his recent attacks on the Chamber of Commerce notwithstanding.  He claims he understands the importance of the private sector to growth, despite his heavy and futile reliance on government spending to stimulate the economy.  Yet he consistently advocates ever higher taxes on the key engine of jobs and higher wages — private investment.  Something doesn’t add up here, Mr. President.

And now the Tax-hiker in Chief has revealed his plan to save Social Security.  Recall that Social Security is now in the red.  By 2015 it will require large and ever growing amounts of general revenue to continue to pay current benefits, imposing a new and growing drain on the budget.  The Tax-hiker’s solution: hike taxes, of course.

In Mr. Obama’s world, as long as the rich have anything left, there’s something left to tax.  So he proposes to lift the Social Security cap.  In 2010, the first $106,800 of wage income is subject to the 12.4 percent Social Security tax.  The president wants to lift the cap, effectively raising the top federal income tax rate on labor income to 53.2 percent.

But there’s more.  According to a report by the Bureau of National Affairs, Mr. Obama also noted that the vast bulk of income earned by millionaires and billionaires is not taxed for Social Security purposes.  The horror!

Of course, the vast bulk of their income is not wage income — the usual subject of a payroll tax.  Millionaires and billionaires typically get their money from capital income, which is not now subject to Social Security taxes.   Mr. Obama seems to be signaling that he wants to turn the Social Security payroll tax into a high-rate general income tax, much as he did with the tax surcharge for Obamacare.

One can only guess what his next tax hike proposal will target, but you know it’s coming.

J.D. Foster is the Norman B. Ture Senior Fellow in the Economics of Fiscal Policy at The Heritage Foundation.