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The Campaign Spot

Election-driven news and views . . . by Jim Geraghty.


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As the Economy Wheezes, Taxes Go Up, Again and Again

As President Obama prepares to call for income tax increases tomorrow – roughly four months after he promised to not raise income taxes for the remainder of his term – and as Americans dread the coming tax day deadline, it’s worth recalling why so many taxpayers are furious with the governing class at all levels.

When it comes to taxation, every level of government thinks they’re only asking for a reasonable slice. And perhaps separately, each is; but the cumulative effect is much more punitive.

Obama and his allies probably wonder why the country is full of anti-tax rage when they have only raised a few taxes during his presidency – most notably the tobacco tax and the tanning bed tax, but the Obamacare legislation also includes six provisions that enact new taxes, eliminate or cap deductions, and eliminate the tax benefits of withdrawing from a Health Savings Account. But overall, the federal tax rates have remained the same. So why the public fury, often directed at the president?

Part of the answer is that in the first year of Obama’s presidency, 29 states enacted tax and fee increases worth roughly $24 billion, the largest single-year increase ever. Of course, these taxes went into effect as unemployment skyrocketed and incomes remained flat. Then, in 2010, as the economy continued to struggle, states enacted another $6.2 billion in tax increases and an additional $2.9 billion in separate “revenue measures”, according to the National Association of State Budget Officers. While it’s only a fraction of the 2009 hikes, it remains the fourth-largest in the past 19 years.

Nine states increased sales taxes; eight states increased income taxes, seven states increased corporate income taxes, seven states increased tobacco taxes, five states increased gas taxes, and ten states increased other taxes. It’s enough to drive you to drink; by some miracle, no state increased taxes on alcohol in 2010. (New York, North Carolina, Tennessee, and Vermont increased them in 2009.)

Then we have local taxes. Eleven cities in California just increased their local sales and use taxes on April 1; the April fool is the person who shops there. In White Plains, Westchester County, New York, where the average home is valued at over $728,000, local government craves more revenue from property taxes and is contemplating hiking rates another 18 percent.

It’s not just a blue state phenomenon; Phoenix imposed a new 2 percent sales tax on food.  Nebraska lawmakers are contemplating raising the ceiling for annual sales tax increases. Montgomery, Alabama is raising its sales tax.

Most localities have hiked property taxes, as local lawmakers noticed that revenue is down as homes lose value. Of course, the struggling homeowners may not have the money to pay. If you lose your job and have no income, your income tax burden shrinks. If you can’t buy as much, you pay less in sales taxes. But property taxes – they’re due, year in, year out, regardless of your own financial circumstances and actions.

Lawmakers in New Jersey tried to rein in local tax increases, imposing a 2 percent limit on annual property tax increases by local governments, with  exceptions for certain expenses, and a provision that allows voters to tax themselves more. (Unfortunately, in the year before the limit went into effect, local taxes jumped 7 percent.) New York state lawmakers are considering a similar move.

Once you add up all the levels of government and all of their various ways of demanding more from the citizens – income, gas, sales taxes, alcohol taxes, property taxes, automobile fees, it’s no wonder the average taxpayer feels abused and exploited. In most places in America, three separate levels of government demand enough to keep their operations going with minimal cuts to the pre-recession levels of spending. Few of them see the taxpayer as their employer; we are the credit card that enables the gratification of spending.

Tags: Barack Obama, Taxes

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COMMENTS   5

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nelson
   04/12/11 10:39

Jim, a tax proposal by Obama actually enacted would obviously be detrimental to the economy, but what is equally detrimental is the uncertainty Obama is introducing at the very moment the marketplace and its participants thought there was some clarity regarding tax policy based upon Obama' previous representations.

Right when you think you can quantify tax rates for the next 18 months, Obama seeks to muddy up the waters again. His 'speech' will depress economic growth. You can count on it.

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Donald Fincher
   04/12/11 12:20

It's not the taxes that have been passed thus far that's the problem. It's the fact that no taxes have been passed yet to cover Obamacare because the Dems have yet to admit this is going to cost money. They peddled it as a cost saver by showing 6 years of costs and 10 years of revenue (which ought to be illegal since they would haul a corporation before Congress and "perp walk" CEO's if private companies "cooked their books" that way). At any rate, the American people that actually pay taxes know that the shoe will drop. The only unknown is how much and what form the taxation will hit. Thus, people already feel angered by the new taxes because they are a certainty if this thing does not get repealed or overturned in court.

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 Fred
   04/12/11 14:11

ObamaCare has already increased taxes on tanning salons. It has effectively taxed insurers by requiring that they begin building reserves to meet the financial requirements of the elimination of lifetime and annual benefit limits, and the imposition of slacker coverage. The imposition of medical loss ratios has resulted in some companies exiting the market. Premiums have, of course, gone up.

Savers are having the heck taxed out of them by the effects of an expansionary monetary policy that is designed to support government spending efforts by keeping interest rates low and will result in inflation.

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   04/13/11 02:29

After all these years it never ceases to amaze me that there are still states that do not have increase caps on property taxes.

Nelson, I have noticed that, since the beginning of his administration, whenever Obama speaks the market takes a hit. Why would you expect anything different this time?

Mr. Fincher, the federal government has never bothered to follow *any* of the accepted practices of accounting.

Fred, you are quite correct. Retirees who rely on interest income on their savings are in especially dire straits. All of the recent federal policies have so dramatically driven down interest rates and caused such uncertainty in the market, that there is no place for them to invest their money that will either generate a return sufficient to keep inflation at bay or which, despite the great pain and deprivation, provides a safe harbor for investment.

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Samuel Clemens
   04/13/11 14:55

“The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.” -Mark Twain

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