Sunday, November 18, 2012

Spot the Differences: The Tax Increase Version

    In activity books for young children, it's not uncommon to find a game called Spot the Differences.  Two pictures appear, almost identical, but with subtle differences, such as this:

    This week, President Obama has presented the American people with a grown-up, higher stakes version of the same game.  Here are his remarks on the "middle class tax cuts" from this past Wednesday's news conference:
The other option is to pass a law right now that would prevent any tax hike whatsoever on the first $250,000 of everybody’s income.  And by the way, that means every American, including the wealthiest Americans, get a tax cut.  It means that 98 percent of all Americans, and 97 percent of all small businesses won’t see their taxes go up a single dime.  The Senate has already passed a law like this.  Democrats in the House are ready to pass a law like this.  And I hope Republicans in the House come on board, too.
    And here's what he said in his Saturday weekly address:
The other path is for Congress to pass a law right away to prevent a tax hike on the first $250,000 of anyone’s income. That means all Americans – including the wealthiest Americans – get a tax cut.  And 98 percent of Americans, and 97 percent of all small business owners, won’t see their income taxes go up a single dime.   The Senate has already passed a bill like this. Democrats in the House are ready to pass one, too. All we need is for Republicans in the House to come on board.
    Yes, there's "option" in the first and "path" in the second.  But that one's about as obvious as the moons in the children's illustration above.  There are several like that.  The difference I am talking about is more subtle, but at the same time enormous.  Give up? (At this point, my youngest daughter would cry out, "No, no, no, no!  Don't tell me!")

    OK, spoiler alert.  Here it is.  That six letter word, "income."  At his press conference, the President said that most Americans "won’t see their taxes go up a single dime."  But in his weekly address, he said "won’t see their income taxes go up a single dime."  Now why did the president add that word?

    If I suffered from delusions of grandeur, I might believe someone at the White House read my blog post on Friday, "'Not a Single Dime' Versus 10,000 Dimes" and developed a guilty conscience.  More likely, the administration has simply realized a need for technical cover for the implicit decision not to extend the payroll tax holiday.  As of January 1st, 2013, millions of Americans will head over their own personal fiscal cliffs as the average middle-class family earning $50,000 sees a net decrease in take-home pay of $1,000.  Last year, the White House presented this scenario as a dire, grocery/heat/gasoline-endangering crisis, but that was before the election, and apparently poor and middle class taxpayers are now well positioned to absorb the blow due to the "recovery," such as it is.

    What continues to amaze me is that six weeks away from this tax increase, it continues to approach virtually unnoticed.  While the Obama administration certainly exploited the issue last time around, the effect on paychecks is real and the primary impact is certainly not on the "rich."  Unless the administration is holding the payroll tax extension as its trump card to outmaneuver the GOP in the fiscal cliff talks, it is difficult to imagine how President Obama will escape the blame for this stealth tax increase.  A Great Depression song is about to be reincarnated as "Brother, Can You Spare 10,000 Dimes," and the answer will undoubtedly be a resounding, "No!"

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