Obama Proposes Massive Automatic Tax Increases with Debt Failsafe Trigger

In Obama's recent speech on reducing the debt (also see my earlier post on this subject), President Obama proposed instituting a "debt trigger," or fail-safe mechanism, that would force the government to make substantial reductions in discretionary spending if deficits exceed 2.8 percent of GDP starting 2014 (which they are going to as a result of his budget calling on more and more spending combined with his policies which encourage lower and lower GDP). Entitlement programs would be exempt, which is important, because entitlement programs make up most of what our government spends money on and are predicted to overwhelm our entire budget in the coming decades, so by making them exempt from this 'debt trigger', the President conveniently votes present on the most important issues facing our nation once again.

Via Yglesias, I see that the White House sent out additional information about this 'debt trigger' proposal. Their bullet points say:

— A debt failsafe that will ensure that our nation’s debt is on a declining path as a share of our economy. If by 2014, budget projections do not show that the debt-to-GDP ratio has stabilized and is declining in the second half of the decade, the failsafe will trigger an across the board spending reduction, including on spending through the tax code.

— The trigger will ensure that deficits as a share of the economy average no more than 2.8% of GDP in the second half of the decade.

— Consistent with prior fiscal enforcement mechanisms put in place by Presidents Reagan, George H.W. Bush and Clinton, the trigger should not apply to Social Security, low-income programs, or benefits for Medicare enrollees.

— The trigger should also include a mechanism to ensure that it does not exacerbate an economic downturn or interfere with our nation’s ability to respond to a national security emergency.

Although this appears to be saying that if the governments spends too much money and drives our nation into bankruptcy, the language is key- entitlements are exempt, welfare is exempt, any 'low-income programs' are exempt, anything that might 'exacerbate an economic downturn are exempt(like 'investments' in 'green energy' or any other favored liberal project), and most importantly, the spending reduction will include reduction 'on spending through the tax code.'

So what sort of spending occurs through the tax code that may be cut out if politicians spend too much money on programs that make our nation less wealthy and prosperous and free?

The formal name for 'spending through the tax code' are tax expenditures, and these are basically 'spending' through the use of the tax code. The sorts of things that the government considers 'spending through the tax code' are tax credits, deductions, exclusions, exemptions, deferrals, and preferential rates.

Examples of 'tax expenditures' include the mortgage tax deduction, the 'Bush' tax cuts, the 'Obama' tax cuts, having pensions be tax exempt, dividend taxes, exclusion of taxes your employer pays on health care, tax credits for children, the elimination of the 'marriage penalty, and many more. A full list of 'tax expenditures' can be found in this document.

What Obama is calling for and Democratic legislators are supporting and liberal bloggers are rallying behind is a provision that will automatically raise taxes on families, employers, home owners, retirees, and many more, in order to transfer wealth to low income earners and other politically favorable groups who will be exempt from such a devastating automatic tax increase.

The fact that the media just let this slip by without discussing and analyzing it is amazing and demonstrates how far outside of the mainstream that Obama is that his proposal to demand automatic massive tax increases on many of us was just another in a long laundry list of horrible socialist leftist proposals and so didn't demand further analysis and commentary.

When you vote next year, don't let you or your family forget that the President of the United States wants you to pay considerably more in taxes so that he and his cronies in government can continue to dole that money out to their favored groups in society.