Breaking the no middle class tax increase pledge (again)

Breaking the no middle class tax increase pledge (again)

On September 12, 2008 in Dover, New Hampshire, then-candidate Obama said:

I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.

On February 4, 2009, President Obama signed Public Law #111-3, the Children’s Health Insurance Program Reauthorization Act of 2009. Section 701 of this law increased tobacco taxes, effective April 1, 2009. Since most smokers have annual family income less than $250,000, this was a clear violation of the President’s pledge.

If anyone argues the President was only talking about “Under my plan,” and that his “firm pledge” does not apply to legislation enacted by Congress, Calvin Woodward of the Associated Press wrote of the Dover campaign speech:

He repeatedly vowed “you will not see any of your taxes increase one single dime.”

Let’s look at the Reid health care bill in the same context. If the President were to sign the Reid bill in its current form, would he violate the Dover pledge?

  1. The clearest violation is the 5% excise tax on cosmetic surgery and similar procedures (including teeth whitening). I assume that cosmetic surgery and similar procedures are skewed toward the high end of the income distribution, but there certainly are many people getting these treatments with annual family income less than $250,000.
  2. The bill would allow State insurance exchanges “to charge assessments or user fees to participating health insurers, or to otherwise generate funding, to support its operations.” [ §1311(d)(5)(A) ] Health insurers would pass these “assessments or user fees” through to consumers as higher premiums. This would affect anyone who buys health insurance, including those with family income less than $250,000.
  3. The bill would impose a 40% excise tax on health coverage in excess of $8,500 (individuals) / $23,000 (families). While policies this generous are almost certainly skewed higher on the income distribution, there are definitely families with income less than $250,000 receiving these plans. Again, health insurers would pass these tax increases through to those families.
  4. The bill would increase taxes on all health insurance plans, as well as on brand-name drugs and biologics, and on medical devices. These tax increases would affect anyone who buys these goods, even if their family income is less than $250,000.
  5. According to CBO, “By 2019, … the number of nonelderly people who are uninsured would be reduced by about 31 million, leaving about 24 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants.)” (p. 8 ) These roughly 16 million people would pay “penalties” of $95 per adult in 2014, $350 per adult in 2015, and $750 per adult in 2016 and later. You’re charged half as much for each kid. Most of these 16 million people paying higher taxes will have family income less than $250,000 and will pay higher “penalties,” although not all will pay these full amounts.
  6. The bill would create a new 0.5 percentage point increase in payroll taxes on individuals with incomes greater than $200,000 in 2013 and families with incomes greater than $250,000 in 2013. Since these amounts are for 2013 and not indexed, someone making $233K in 2009 would be affected by this in 2013, assuming 1% annual real wage growth and CBO’s assumptions about inflation. If you’re making $220K this year, you’ll probably be hit by the new tax in 2016. $210K this year, you first get bit in 2017, and so on.

These are six tax increases (eight if you split #4 into its three components) that would violate the President’s pledge. I believe #1, #5, and #6 are indisputable.

The Administration could argue that #2, #3, and #4 don’t violate the letter of the President’s pledge, in that the incidence of the tax falls on the seller of the good, rather than on the purchaser of the good. But almost every economist will say that the economic impact of those tax increases would be felt by the person who buys that good, meaning these provisions at a minimum violate the spirit of the President’s pledge.

I would also argue that someone who would not otherwise buy health insurance, but does so to avoid the individual mandate / penalty, is being taxed. But I didn’t want the philosophical debate that underlies my view to detract from the conclusion derived from the above list.

Will President Obama sign such a bill that repeatedly breaks his “firm pledge”?

When the Administration issues its Statement of Administration Policy on the Reid bill, will it raise these objections?

(photo credit: Jeff Glagowski)

38 responses

  1. Pingback: Tweets that mention Breaking the no middle class tax increase pledge (again)  |  KeithHennessey.com -- Topsy.com

  2. Pingback: Instapundit » Blog Archive » KEITH HENNESSEY: Breaking the no middle class tax increase pledge (again). With helpful-reminder v…

  3. Obama's tax pledge literally wasn't credible at the time he made it.

    He's repeatedly said he will allow the Bush tax cuts to expire, meaning there WILL be capital gains, dividends, and other tax increases on households earning under $250k per year, in direct contradiction of his pledge.

  4. Regarding "someone who would not otherwise buy health insurance, but does so to avoid the individual mandate / penalty," under the Reid bill, the penalty, which is, as I understand, $95/year increasing up to around $750/year, is still much cheaper than annual insurance premiums. Additionally, the Reid bill makes it illegal for insurers to deny policies to people who are already sick. So what incentive is there for anyone to purchase insurance? If your budget is tight, the most economical thing to do is to pay the fine every year and wait until you get sick to purchase insurance, so long as the government guarantees you will not be denied. Of course, if no one is paying premiums and the insurance companies cannot deny coverage to anyone, then the insurers have no way to finance claims and will go bankrupt…

  5. They're fees, fines, duties, penalties and service charges, not taxes. Stupid paranoid Republicans.

    • if it walks like a duck, quacks like a duck its a duck you idiot. First problem with your arguement is that the federal government has no right under the constitution to mandate this plan. It is a states rights issue. Secondly, if it is to be collected by the IRS it is a tax related item. It doesn't matter what you call it. Is it any wonder this fool was elected president with people like this in the country

    • I have multiple sclerosis and there are no generic brands for most of my medications. I'm disabled and I don't make $250,000. I'm going to have to pay a tax for medicine. In case you forgot, read number 4 again. I believe it clearly says TAX.

  6. These are indirect taxes, what the companies do to pass on the tax to the consumer is their business. See, Obama did not break his promise.

  7. I still don't understand why presidential candidates continue to repeat mistakes from previous presidential candidates when campaigning for president. It should be obvious to any candidate that you simply cannot promise that taxes won't be raised. "Read my lips, etc.."

    I guess I really mean- I know WHY they do it, but I don't see how they think they can get away with it.

      • Touche'. Joke's on us then, I guess.

        It just baffles me that politicians still make this promise. And as you say, what's worse is that they do indeed "get away with it" to the point that it doesn't prevent them from getting elected.

      • "It just baffles me that politicians still make this promise."

        …it just baffles me that voters continue to believe that promise, given so many historical examples of its vacuity.

  8. Do you have a job? Yes? In the Age of Obamanomics, you are the upper class, the middle class are those who can't find a job for the last 18 months. No jobs, no taxes, no breach of pledges which only the brain deads believed anyway.

  9. Wrt kbh's 6 item list of taxes, I offer the following:
    -the Cadillac plans (item #3) are held in significant part, if not primarily, by blue collar workers–these are part of the benefits unions obtained during wage and benefit negotiations. Whatever we might think of a union or a union worker, their wages generally are not in the "greater than $250k" range.
    -the taxes on the various items (items 1, 3, and 4) will raise the costs of those goods, whether the taxes are imposed on the seller or on the buyer, as the seller will pass on those costs. This has been pointed out before. The problem here is that we don't know the assumptions the CBO made (we do know the assumptions made by the Democrats–they made none, as they don't care about costs to us) when it arrived at its revenue generation values from these items. When the cost of a good goes up with no concomitant rise in value to the buyer, which is what happens when you tax a good without doing anything else to it, the buyer stops buying that good–demand goes down with price increases. What will happen to the expected revenue when these goods no9 longer are purchased?

    There are a couple of other items not mentioned: the Reid Health Care Deform Bill will shift a significant portion of the cost of Medicaid to the states. What do you suppose will happen to state taxes? The "doctor fix" was taken off the Reid Health Care Deform Bill's books by putting those costs into a separate bill. These costs are an additional $250B. No deception here.

  10. Here's another "non-tax":- American citizens who are residents of foreign countries will have to pay $750 per person ($1900 per family maximum) for medical services available to them only in the USA.

  11. My comment may not be clear:- American citizens who are residents of foreign countries will have to pay $750 per person ($1900 per family maximum) even if they do not travel to the USA. This applies even If they are covered by a health program in the country in which they live and have no reason to travel to the USA.

  12. Pingback: With Reid Bill, Obama Would Again Break “No Tax” Pledge | Fix Health Care Policy

  13. Obama was truthful when he said our taxes would not increase by one dime – and apparently he meant it literally – just one dime. Our taxes will increase by hundreds of dimes.

  14. Of course if you believed that promise at the time(s) it was made and voted accordingly, you deserve to have your taxes raised. However, those of us who never did believe it, and voted accordingly, are also going to be stuck with the bill.

  15. Sorry these were just campaign promises. As they say in New Jersey – "it don't mean nuthin!"

  16. Goal: To create a National Healthcare System that is all inclusive and has the least amount of intrusion into private lives and businesses.
    1) Create a Federal Hospital and Clinic System that mimics the representation of our current government.
    a) Two Federal Hospitals for each state to deal with advanced surgeries and advanced healthcare issues.
    b) One Federal Clinic per congressional district to cover everday health care issues such as check ups colds and flus etc etc.
    2) No US Citizen will be denied Healthcare for any reason at these sites. Citizenship must be verified.
    3) Four Federal Medical Schools will provide Docotrs to service these Hospitals and Clinics. In return for educating these new medical students, each graduate must in return serve 4-6 years at either the hospitals or the clinics.This is similar to the current GI Bill.
    4) Allow Health Insurance policy's to compete in all US states.
    5) Create a National system for keeping and accessing electronic medical records for every US citizen.
    6) Tort Reform.
    7) Medical savings accounts
    Problem Solved

  17. Beneftis of the plan:
    1) Insurance company's do not come between you and your healthcare.
    2) Your Health Insurance becomes a mattter of convienience rather than a necessity.
    3) People will use there Health Insurance only when needed reducing frivilous costs thus premiums.
    4) All US citizens will have access to healthcare.
    5) The program is simultaneously all inclusive and limited in nature, in that there are a limited number of facilities to dispense the al inclusive free access to healthcare.
    6) Prexisting conditions are not a factor for healthcare.
    7) HelathInsurance company's are not involved in the cost/reimbursements of the healthcare allowing the Federal Hospitals and Clinics cut costs drastically by only dealing with medical supply company's.
    8) No goverment involvement in dictating or defining healthy lifestyles in order to get healthcare coverage.

  18. Pingback: Oprah picked Obama to be president and is surprised to be under the bus now that he doesn’t need her any more — Cynthia Yockey, A Conservative Lesbian

  19. Goal: To create a National Healthcare System that is all inclusive and has the least amount of intrusion into private lives and businesses.
    1) Create a Federal Hospital and Clinic System that mimics the representation of our current government.
    a) Two Federal Hospitals for each state to deal with advanced surgeries and advanced healthcare issues.
    b) One Federal Clinic per congressional district to cover everday health care issues such as check ups colds and flus etc etc.
    2) No US Citizen will be denied Healthcare for any reason at these sites. Citizenship must be verified.
    3) Four Federal Medical Schools will provide Docotrs to service these Hospitals and Clinics. In return for educating these new medical students, each graduate must in return serve 4-6 years at either the hospitals or the clinics.This is similar to the current GI Bill.
    4) Allow Health Insurance policy's to compete in all US states.
    5) Create a National system for keeping and accessing electronic medical records for every US citizen.
    6) Tort Reform.
    7) Medical savings accounts
    Problem Solved

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