The Campaign Spot

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.

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