Thursday, February 26, 2009

Obama Budget = $1 Trillion Tax Hike

Yesterday during News Talk Online on I asked the question, "where is the money going to come from to pay for President Obama's economic recovery package?"

Several callers suggested that it will come in the form of a tax hike. But my response then was, in essence, he's not called for a tax hike for anyone making under $250,000-a-year. In fact, as of April 1, those individuals should see, the president says, larger paychecks because federal taxes are being reduced.

But today, during his budget address, the president proposed nearly $1 trillion in taxes.

Of course, if you're going to reduced taxes for most of us, increase spending and cut the federal deficit of $1.3 trillion in half in four years, you have to get the money from somewhere.

This means a fundamental switch in how taxes are collected in the United States. Poor and middle income families will see a reduction in their tax obligation. But 2.6 million of the richest Americans will pay a greater proportion.

Since most of us are unaffected by this, why should we care? Because Americans believe in the concept of fairness. So, as unpopular as this may seem, I, who by way of disclosure stand to benefit not lose by this plan, am going to cry "foul."

This is not to say that the burden should be placed on the poor either. It should be evenly distributed.

In my mind, there's only one way to do this: eliminate the federal income tax.

I say, get rid of the income tax with its loop holes and tax shelters and disproportionate burdens. And replace it with a federal sales tax.

Here's what will happen if we do that.

People will come home with fatter paychecks. If you have a $50,000-a-year-job you'll take home close to that. Of course there will have to be other withholdings, perhaps for Social Security, state income taxes and the like. But in the main, those who are employed will know how much they are actually making.

If you have more money in your pocket you have more money to spend as well. If you spend money, that money will be taxed. The federal government won't suffer. In fact, this plan has the potential of raising a lot more money for the feds than the income tax.

But that's not all.

All those tourists who are coming here to enjoy the United States (and we welcome them with open arms!) and who are spending so much money because their currency is strong against the dollar right now will be contributing to the funding of the infrastructure they are benefiting from during their visits.

But, as the late night TV pitch man might say, there's even more!

All those illegal immigrants who are, advocates argue, draining public resources but not contributing, will in fact be paying their fair share as well.

Every time they go to a McDonald's to buy their one nutritious meal of the day, they will be charged a federal sales tax. You've heard about pay to play programs? We can call this one pay to stay.

By the way, for those of you who think this plan lets the rich off the hook - it doesn't. People who have more money spend more money. If they spend more money they will be contributing more to the federal monetary stockpiles.

Finally, it takes the federal government out of the business of being punitive toward its own citizens over an income tax whose regulations are impossible, even for the IRS, to follow.

I have no problem with pumping money into the economy to stimulate it. And I agree with reducing the federal deficit. Now let's find a way to share this burden equally among all of us, citizens or not, who live and work or visit this great nation.

We'll talk about Obama's proposed budget and my vision of a fair tax structure at 5 PM New York time today on News Talk Online on CLICK HERE to join in the conversation.

Paltalk is the largest multimedia interactive program on the Internet with more than 4 million unique users.

News Talk Online is also syndicated by CRN Digital Talk Radio to an additional 12 million households.


Anonymous said...


Anonymous said...

What about payroll taxes Gary? FICA, etc.

Anonymous said...

i want bush and regan back !!!!!

Anonymous said...


Anonymous said...

Hi Gary,
One thing I DID do last night was take the time to watch Bobby Jindal's rebuttal. ALL his answers are correct, but he needs to work on his public speaking. ( Its a bit soft)
the ONE thing we all CAN do is follow the "bailout" Funny that.. when Bush funded stimulus, it was called a bail out... now that Obama is doing it, its miracuously a "stimulus package"... You can see what has actually been proposed by going to There you can view each states "gifts" and see what are most critical, most expensive and basically a load of crap.
As you know, I'm originally from New Mexico. Gov. Richardson Got a couple of HUGE pork bills passed ( as a consolation prize I'd say for having to turn down the Sec of commerce job.) His biggest faux pau is the creation of a new "events center" in Albuquerque ( a mere $148,300,000) creating 14,000 jobs.... the problem IS.. ABQ cant even keep its VERY nice existing convention center booked to capacity... UGH! Then there is the double eagle wind farm...which is a multimillion dollar proposal, to only employ 200 people, but all it will do is actually INCREASE electricty costs (PNM is one of his biggest supporters)* Not to mention most of Chavez county has ALREADY been designated for a wind farm in NM.
Obamas BAILOUT is all geared toward SPENDING,and higher taxation to tax the INTELLIGENT that have worked their whole lives to NOT be in lower tax brakets. Many of these people came from humble means and DESERVE what they have earned. It all makes me pretty mad.-Leesah

Wayne Boesch said...

Right on, Gary. There is no doubt that income tax, which was unconstitutional before 1913, is the biggest ripoff going. Income tax will one day cause a revolution in this country which will dwarf the Boston Tea Party. The only difference is that there is a pretense of representation now in this more genteel age. In fact, the IRS is a tyranny and really not necessary. If you want to put someone in a bad mood, tell him he's about to get a tax audit. It ranks right up there with colonoscopy or root canal on the pleasure scale!

Gary is correct about the federal sales tax. It evenly and proportionately distributes the load among citizens and noncitizens alike. With sales tax, there is no unfair and biased "graduated scale" to penalize those at the top of the food chain. Those hated "rich" are not really that rich afterall! Those people in the 250k range are mostly small business owners. Why should they pay a higher percentage of their income to the federal cesspool when their contribution is indeed already disproportionately high! They are providing jobs for other people and buying more than those lower down in the chain. Taxing them at a higher penalty is like cutting off the most leafy and productive limbs of a tree to save a few diseased or broken limbs, while the entire tree suffers. That doesn't make sense and it's not the way nature works. Everything in nature flows from higher to lower, from greater to smaller. Trickle-up is a myth and wishful thinking, in other words. In contradicts the laws of physics and economics alike.

Barack Obama could really be a national hero if he'd stop making these porkalooza spending packages and abolish the IRS. As I said in my last post, FDR tried this stuff and nearly broke the country till WW II pulled our bacon from the fire. Japan tried the same old tired nationalization of banks and such, with equally dismal results over a 10-year period. Is Barack smarter than everyone else? How will he pull it off when no one else has managed to?

In summation, Barack, abolish the IRS and turn the reins of recovery over to the PEOPLE! You say you want to help people, then please, sir, get the hell out of our way and let us spend our money as we see fit. And to Nancy "Aerobics Queen" Pelosi and Harry "Dim Bulb" Reid, renounce your foreign bank accounts and tax-cheating ways. If you want to tax me so much, then please pay your own. Barack, quit calling your plans NEW when in fact this is the same porky crap which has been going on since FDR... If you're going to reinvent a wheel, make sure it's round at least...

Anonymous said...

I'm sorry, I must have missed something. Eliminate the federal income tax, the only tax based on the ability to pay? Because it's too difficult for rich people to understand? Wait, I meant to say, it's too difficult for rich people's accountants to understand? And we make up for this by charging immigrants, many of whom are making less than a minimum wage, tax on food? So the plan is to get rid of them by starvation? That sounds a lot like Hitler's final solution, Gary. You are insane. Take that to the bank.

Allan Masri

Anonymous said...

If we want to talk about equality, then with the Ultra rich being only o.1% of the population with $10 million in annual income and assests and the gap growing 400% since 1980 between the hyper rich and the rest of America, Yes, They need to pay higher taxes.

Gary Baumgarten said...

Rarely do I comment on a comment on my blog, but today I must make a notable exception.

While you and I, Allan, may disagree on my suggestion that the federal income tax be replaced with a consumption tax, to compare my commentary with Hitler's final solution is beyond repulsive.

I've carefully reviewed my posting and nowhere do I see where I've suggested that illegal immigrants be rounded up in cattle cars and sent off to extermination camps. In fact, if you knew a little bit more about me you'd know that I've been a strong champion for human rights for immigrants, while at the same time favoring better immigration policies and incarceration then deportation of undocumented immigrants who commit criminal acts. Perhaps to one with an agenda, these views may seem contradictory, but to me they are not mutually exclusive.

At any rate, it sickens me that people who disagree with one another must reduce the rhetoric to name calling and personal attack. I may or I may not be insane, but you're certainly in no position to judge.

Anonymous said...

As an alternative this could well work Gary, depending on the amount of revenue you need to attract to offset the losses from Income tax revenue.
However, would you impose the same amount of product tax on all items? Would you suggest, for example, taxing food, and books, and kids' clothes? The reason I ask is that in the UK a similar sounding sort of thing is in operation at a rate of 17.5% ( although at this moment it is temporarily 15%), it does , however, exempt those items I just mentioned. Oh, and also, we give visitors exemption from VAT.

Anonymous said...

This is not a new idea. It has been floated around a lot. It is simple, sounds attractive but nearly every time I see it floated around someone bursts the balloon by pointing out that it will be a far greater break for the rich than the middle class downward. In fact to make up the loss of revenue it will ultimately cost the middle income earner more and the poor much, much more.

More often I see a consumptive tax rate also thrown out with this, then again someone far more knowledgeable on this than I could be takes a realistic look at those figure. And with these realistic figures again the tax is paid far more in percentage of income than what exists now for the middle class.

Granted we all hate the income tax, but no one has come up with a viable program that doesn’t hurt someone and in particularly those in the middle income. I would love to see it simplified but I am just like everyone else, how much is this really going to cost me. And quite frankly, from those who I trust with knowledge of the figures, way too much.

Watch what you wish for, you may regret it when you get it.

Anonymous said...

we may have a glimpse of what is just around the corner for all of us as taxpaying citizens but all this spending seems like a monoply game----- sadly it is not. and where this all goes is uppermost in my mind, how would the flat tax rate? Jamie_38

Anonymous said...

I like your idea, sounds sensible. It would make everyone including illegal immigrants contribute to taxes. Now if only our government would become logical :) Is that hoping for too much? sighh

Wayne Boesch said...

The beauty of the consumption tax (federal sales tax) for the middle class is the fact that each person is in control of his/her own destiny. To make the burden less onerous on the middle class, certain staples such as food would be exempt from sales tax. The other items, all basically non-essentials, would be taxed at point of sale. If you want to pay less tax under this system, you simply buy less! What could be more beautiful than that? Savings are encouraged, plus no government control of your monthly paycheck. I see no downsides for the middle class at all.

Anonymous said...

The economic recovery package will be repaid by revenue to be received in the future, perhaps beginning three or four years out at the earliest. It is too early to speculate on the sources and mix of that revenue. If the economy were to fully recover and even grow at a decent rate, powerful repayment dynamics would be set in motion to repay much of the funds without raising tax rates to any great degree. If that is not to be the case, then we will certainly be looking at a period of austerity or a prolonged period of slower growth and future cuts in government spending. Capital infrastructure spending should rightly be paid of over a course of time as long as thirty years. It is too early to talk about balancing the budget.

P.S. Sorry you have to endure such inflammatory language elsewhere.

Steve Klingaman

Anonymous said...

"Because Americans believe in the concept of fairness."

Sorry, but a consumption tax isn't any "fairer" than a progressive income tax. The assumption that somehow all wealthy people "deserve" to make more money isn't "fair." Fair is a totally subjective term. I consider it "fair" for those who can afford to pay more to do so, so as to support those who did not enjoy the same opportunities.

Anonymous said...

Okay I had to comment again since reading some of the posts. I am really having a hard time grasping why some think just because one person who WORKS and more than likely has the experience, and/or talent to make more money should pay for someone who doesnt want to work? So are we saying here that if I feel like I don't want to work someone who is willing to work should pay me? Where is the logic in this? Many of the wealthy have gotten there by working it isn't their fault that some refuse to earn a wage. With Garys counter-proposal these people who want hand outs will be paying taxes along with the rest of us and I think that is fair enough. Its about time they contribute to their own wages.

Anonymous said...

Its a idea to throw out there Gary. I remember people throwing out the flat tax idea which today may be a good idea. The idea that some people have of "robbing" the rich to pay the poor is outragious. Sense when have we become our brothers keeper? Teach them to fish.
And Alan, why dont you take in a homeless person tonight. Give them a meal and a bed. Maybe some clothes. Or maybe you should pay your illegal a fair wage. Sheesh

Anonymous said...

Allan for one if you are an immigrant, legal or not, do not VOTE in the USA "legally". SO with that said unless you have become american what ever is taxed or not taxed sorry bud, you do not have the voice in essence to make a difference. As for eliminating the Fed tax and implementing a consumption tax,what does that have to do with HITLER or his nuremberg laws!!! he placed when in germany when he got into power! give me a break! hahaha honestly, i read this blog all the time and i am not an avid blogger. except to compare gary's suggestion to hitler is beyond one of the narrowest remarks i have seen yet.
Oh by the way Allan if you like it or not, or as i can see not very aware that there is a consumption tax on some foods, they are just HIDDEN! i am laughing Gary and touchez on your response.
I am not signing my name cause it's not important i am laughing still.........

Anonymous said...

Tjonna i agree i am really tired of the hand out me me me mindset! when these people if born in the usa have been trained this way or gov wants them to be in that place. If they r not legal i am sick of good people who work and pay taxes only to support illegals! i do believe in the 80 20 rule and it applies here also...

Anonymous said...

From NH Mom:

You should not assume that NEXT year's budget won't suddenly include additional taxes for an even broader group of individuals including workers bringing home less than $250,000.

Overhauling the tax system IS one of the answers here - I however, in the interest of fairness and equality, prefer the flat tax. 17% across the board for everyone earning over a certain amount. Those earning below the threshold pay nothing. Keep deductions for mortgages.

Simple, enforce-able, and inherently fair.

The current tax code is not bad because it punishes rich people, it is bad because it punishes excellence and success. It punishes those individuals and businesses that create jobs, which are the engines of our economy.

However, we also MUST dramatically cut government spending. It is easy for the President to promise to cut the deficit in half when he is going to more than double it before then! Keep in mind that he is just ONE MONTH into his administration.

Finally, to Alan Masri, I must join Gary in admonishing you for your remarks - they are repulsive and completely out of perspective. No one, anywhere, has suggested such a thing and your inflammatory comments are intended only to dampen debate. You should be ashamed of yourself.

Excellent column Gary- I will be back to read more in the future.

Anonymous said...

Another benefit of this is that it is easy to see when taxes have been raised. And, since everyone would be involved in paying taxes for services they receive, it might result in people having a greater sympathy for smaller government.

The biggest risk is that we could end up like Europe where they have both income taxes and a sales tax (actually VAT).

I assume you would support exemptions for basic necessities which would benefit poorer folks.

The Intellectual Redneck said...

Taxing the rich at 100% won't pay for Obama's budget. The Wall Street Journal has reported that taxing the rich at 100% won't pay for Obama's budget. Barack Obama promised not to raise taxes on anyone making under $250,000 per year. Where is he going to get the money? The numbers indicate Obama will need to take 100% of the income of everyone making over $75,000.