The Coming Tax Hike


It should be clear to everyone that the monumental costs of the health care bill, along with the astronomical debt already run up by the Obama administration, are unsustainable. This clarity presumably includes the president himself, who has charged the “National Commission on Fiscal Responsibility and Reform” with the task of figuring a way out of this mess.

Long-term projections suggest that the national debt will rise to unprecedented levels in the years ahead, based on all of the promises and programs associated with this administration. Clearly, something needs to be done. The commission is looking at both spending cuts and “revenue enhancements” (what we used to call “taxes” back in the old days) as a means of getting the budget back under control. Anybody care to place a wager on which method will be most preferred?

The commission is billed as bi-partisan, and that’s true in terms of party representation. There are three Republicans from the House and three more from the Senate on the eighteen member panel. Further, any recommendation has to be approved by at least fourteen commission members before being incorporated into the commission’s final report, due in December. Seemingly, Republicans could derail any tax-hike proposals. Whether they will or not is another matter. But, whatever the GOP members of the commission do, it probably won’t matter in the long run. This commission will deliver one of two results, neither of which is very attractive to a fiscal conservative.

On the one hand, Republicans may stick by their “no new taxes” pledge. In that case, the commission will fail. Absent a tax hike, the only route to balancing the budget goes through massive spending cuts. Doing so would be plainly unpalatable to Democrats, who aren’t going to abandon or pare down the very kinds of entitlement programs and enormous bailouts that they have happily been implementing for the last year. A few modest cuts? Sure. A proposal to fix Social Security, or at least push the day of reckoning farther down the road? Perhaps. But, meaningful, responsible cuts in social programs? Not a chance.

In this scenario, the commission would be expected to deliver a cursory report with few meaningful recommendations, or perhaps no report at all. The president would then wring his hands, furrow his brow and lament that he tried his darnedest to find a by-partisan solution, but those awful Republicans continue to play politics with every issue Democrats bring to the table. If, at this point, Democrats still hold the House and Senate, Obama or one his patsies in Congress will then propose a solution. We’ll get to the specifics of that solution in bit.

The other possibility is that enough Republicans will cave and the commission will recommend a tax hike. Perhaps Republicans will see a tax hike as inevitable and view this as their best opportunity to minimize the hit while wrangling some spending concessions from Democrats in return for their support. Perhaps they will be promised some goodies for their districts. Or maybe they will look at the flood of rink ink that’s set to pour over the dam and conclude that a tax hike is the responsible, if painful, thing to do. Whatever their motivation, it’s a creditable scenario. Republicans have shown a bit of fiscal backbone as of late, but history tells us that is usually a temporary condition in the GOP.

It’s worth noting that Obama put Service Employees International Union president Andy Stern on the commission. That’s worse than putting the fox in the henhouse. It’s more akin to handing Colonel Sanders the keys to the chicken coop. Stern, who apparently has an “anytime, all access” pass to the White House, based on the amount of time that he confers with Obama, isn’t going to agree to any deal that might result in some of SEIU’s 2.2 million members losing their jobs. Since Stern is now an insider with the commission, the unspoken threat has to be clear to the politicians serving on it: make a recommendation that hurts SEIU and Andy Stern will let the rank and file know exactly how you put big business in front of the working man.

In either scenario, the tax hike to come – as has been reported by many media outlets – is likely to be the “value added tax,” or VAT. The VAT is the most politically palatable means of raising revenue for a couple of reasons. It’s a stealth tax, for one. Consumers won’t see a line item on their receipts labeled “VAT,” but the costs will be built into the products they buy as surely as if it were a sales tax. It also appears to be a fair tax, since it applies equally to all goods and services. That’s how the VAT will be sold to the public, but the reality is quite a bit different.

The VAT is a regressive tax, making the costs of goods and services more expensive as a proportion of income for those who can least afford it. It’s also another way for government to extend the clinging claws of the bureaucracy even further into the free market, since the VAT is applied to every transaction that occurs along the way as goods are produced and services are offered. Liberals may – probably will – point out that some conservatives have championed VAT proposals in the past. True enough, but those conservatives who like the VAT do so as an alternative to an income tax, not in addition to an income tax.

There is one scenario in which the VAT might actually make sense: as a temporary measure tied to federal workforce reductions. In other words, Democrats can have the VAT for a year or two, with a hard sunset provision included, but only if they agree to cutting the federal workforce by “x” per cent in year one and by a further “y” per cent in year two.

That would be a neat start to fixing the mess the Democrats have created, but it is of course an unworkable solution. Nobody in their right mind would trust Congress to stick to a sunset provision attached to revenue generation and, even if you could, Andy Stern isn’t going to let his troops lose job one. Accordingly, the smart move for Republicans is to cut the legs out from under the VAT now, by making it an issue in the November elections. Might we hear a “say no to the VAT” pledge from GOP candidates this year? Taxpayers, and beleaguered American entrepreneurs, would welcome such a promise with open arms.

  • Jacob Wilson

    The third option is for a total refund of the national deficit by the IRS taxing the Congress and President of all their accumulated wealth, lands, perks and their removal from Washington as outline in the Declaration of Independence, paragraph 2.

    "…That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness. Prudence, indeed, will dictate that governments long established should not be changed for light and transient causes; and accordingly all experience hath shown that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same object evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security…."

    The right to keep and bear arms and a regulated militia of Americans (US Armed Forces) will not attack their own families but will defend America from tyrants.

    • N. Stahl

      Mr. Wilson, some Army National Guardsmen did attack Americans in the wake of Katrina. Some participated in the illegal confiscation of arms from citizens. None of the officers and enlisted involved were properly punished for their misconsuct ("properly punished" means Article 32 to Article 37 to public execution). Many military personnel will carry out orders and attack other peoples' families out of obedience to the chain of command, and the knowledge that there will be court martial for their acts.

      • Jacob Wilson

        Mr. Stahl

        Some Army National Guardsmen did attack young American snipers shooting at police and firemen who came into the city to put out the fire and prevent looting.

        They did take the weapons from those thugs who were shooting and robbing during the aftermath of Katrina.

        Are you aware of today's date?

        • coyote3

          Bravo Sierra. I was there, they took, or er tried to take, firearms from citizens who had committed no crimes.

      • Alfred

        Those who attack the citzenry, on orders or not, will simply have to be shot like the rest. Being a casualty or not won't be a choice for politicians or bureaucrats in offices, but it will be a choice for soldiers.

  • BS1977

    How high will taxes go to cover a trillion dollar socialized health care bill? The fourteen trillion dollar deficit, the trillion dollar stimulus bail outs and pork barrel corruption? How high will taxes go to cover mortgage bail outs, college loan bailouts…and maintain the present social security, Medicare, Medicaid, military services, foreign aid…..unemployment benefits and HUGE federal employee wage costs? I don't know…maybe Barney Fwank, or Harry Reid has the answer. Do you have the answer…it is going to cost more than anyone knows!!!!!!!!!!!!!!!!!

    • Arnold Wolf

      I think I know exactly what is was intended to cost the American taxpayer.

      It will cost the inalienable rights to life, liberty and the pursuit of happiness of all Americans. A tyrannical power grab by the unduly Acorn elected government that will result in a one world Sharia law of Islam.

      • Linda

        Arnold amen

  • N. Stahl

    Oops. The last part of the last sentence should read "and the knowledge that there will be NO court martial for their acts." D'oh!

  • Sarah Leah Lawent

    So, the only 2 sure things are: Death and Revenue Enhancements?

  • gamalpha

    We've already been taxed by Obama. 20% of the value of our dollars has been printed away to buy off congressional votes for a health care plan that we oppose.

  • badaboo

    gamalpha ,we've already been paying 20% income tax , for several years , so are you saying that will jump to 40%?

  • http://intensedebate.com/people/bubba4 bubba4

    Let the tax cuts to the rich expire. #1

    This author knows that states are the ones in serious trouble and that many of them are looking for new things to tax in order to close budget shortfalls. This "VAT" business is just so the poor readers around here make the right associations. It's not your state trying to recover from near economic collapse…it's some Fed tax to pay for healthcare for a bunch of lazy bums.

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    can u post more articles abt xbox 360? cause i already added ur feed to bookmark

  • Linda

    badaboo, stay tuned, and get ready to weep.

  • badaboo

    There ain't no free lunch Linda , for even when politicians say no new taxes ……you get taxed anyway .