Charles Krauthammer divines the true method behind ObamaCare's fiscal madness: force adoption of a European-style Value Added Tax, creating a womb-to-tomb European Welfare State, with high taxes, high unemployment & high benefits allocated by government::
American liberals have long complained that ours is the only advanced industrial country without universal health care. Well, now we shall have it. And as we approach European levels of entitlements, we will need European levels of taxation.
Obama set out to be a consequential president, on the order of Ronald Reagan. With the VAT, Obama's triumph will be complete. He will have succeeded in reversing Reaganism. Liberals have long complained that Reagan's strategy was to starve the (governmental) beast in order to shrink it: First, cut taxes -- then ultimately you have to reduce government spending.
Obama's strategy is exactly the opposite: Expand the beast and then feed it. Spend first -- which then forces taxation. Now that, with the institution of universal health care, we are becoming the full entitlement state, the beast will have to be fed.
And the VAT is the only trough in creation large enough.
As a substitute for the income tax, the VAT would be a splendid idea. Taxing consumption makes infinitely more sense than taxing work. But to feed the liberal social-democratic project, the VAT must be added on top of the income tax.
One reason for a VAT is that, as economist Alan Reynolds writes, the administration's plan to extract $1.2TR from rich taxpayers over the next decade will not work. Such filers already pay over 50 percent of income taxes. Reynolds explains:
President Barack Obama's new health-care legislation aims to raise $210 billion over 10 years to pay for the extensive new entitlements. How? By slapping a 3.8% "Medicare tax" on interest and rental income, dividends and capital gains of couples earning more than $250,000, or singles with more than $200,000.
The president also hopes to raise $364 billion over 10 years from the same taxpayers by raising the top two tax rates to 36%-39.6% from 33%-35%, plus another $105 billion by raising the tax on dividends and capital gains to 20% from 15%, and another $500 billion by capping and phasing out exemptions and deductions.
Add it up and the government is counting on squeezing an extra $1.2 trillion over 10 years from a tiny sliver of taxpayers who already pay more than half of all individual taxes.
It won't work. It never works.
The maximum tax rate fell to 28% in 1988-90 from 50% in 1986, yet individual income tax receipts rose to 8.3% of GDP in 1989 from 7.9% in 1986. The top tax rate rose to 31% in 1991 and revenue fell to 7.6% of GDP in 1992. The top tax rate was increased to 39.6% in 1993, along with numerous major revenue enhancers such as raising the taxable portion of Social Security to 85% of benefits from 50% for seniors who saved or kept working. Yet individual tax revenues were only 7.8% of GDP in 1993, 8.1% in 1994, and did not get back to the 1989 level until 1995.
Put simply, taxpayers alter their investment, tax & work strategies to minimize the impact of punitive levies.
Herb London warns of ObamaCare's threat to liberty. A WSJ 3/30 editorial explains what I missed last week; ObamaCare does not explicitly call for hiring 16,500 IRS agents. The figure is a GOP extrapolation from the IRS budget, to derive an estimate of what will be needed to enforce compliance on the new levies; if the IRS is left at present levels of resources revenues will be lost.
A WSJ editorial last week offered emerging examples of diminished health care choice, already underway due to ObamaCare. At NRO Rich Lowry warns that deteriorating finances will force choosing between guns and butter, and that Obama clearly will choose to preserve the latter. Nobel economist Gary Becker's WSJ interview presents an optimist, but one who fears, as in the old joke about optimism & pessimism, that his optimism may be unjustified.
A WSJ editorial notes major companies already writing down their asset values due to anticipated ObamaCare impact--$14B during 2010, according to one consultant. Naturally, a senior Obama administration hack calls these "irresponsible" while California thug-Rep. Henry Waxman (D-Beverly Hillbillies) plans an April 21 kangaroo-court show trial of major CEOs. NRO's Rich Lowry adds detail on Waxman's efforts to muzzle companies hit by ObamaCare.
A WSJ editorial today describes just how outrageous this pressure is--companies are required by law to do what Waxman warns them not to do:
So the wave of corporate writedowns—led by AT&T's $1 billion—isn't caused by ObamaCare after all. The White House claims CEOs are reducing the value of their companies and returns for shareholders merely out of political pique.
A White House staffer told the American Spectator that "These are Republican CEOs who are trying to embarrass the President and Democrats in general. Where do you hear about this stuff? The Wall Street Journal editorial page and conservative Web sites. No one else picked up on this but you guys. It's BS." (We called the White House for elaboration but got no response.)
In other words, CEOs who must abide by U.S. accounting laws under pain of SEC sanction, and who warned about such writedowns for months, are merely trying to ruin President Obama's moment of glory. Sure.
Presumably the White House is familiar with the Financial Standard Accounting Board's 1990 statement No. 106, which requires businesses to immediately restate their earnings in light of their expected future retiree health liabilities. AT&T, Deere & Co., AK Steel, Prudential and Caterpillar, among others, are simply reporting the corporate costs of the Democratic decision to raise taxes on retiree drug benefits to finance ObamaCare.
Mark Steyn notes that one firm is heading for incorporation in Canada, no less--yes, CANADA:
In 2003, Washington blessed a grateful citizenry with the Medicare prescription drug benefit, it being generally agreed by all the experts that it was unfair to force seniors to choose between their monthly trip to Rite-Aid and Tony Danza in dinner theater. However, in order to discourage American businesses from immediately dumping all their drug plans for retirees, Congress gave them a modest tax break equivalent to 28 percent of the cost of the plan.
Fast forward to the dawn of the ObamaCare utopia. In one of a bazillion little clauses in a 2,000-page bill your legislators didn't bother reading (because, as Congressman John Conyers explained, he wouldn't understand it even if he did), Congress voted to subject the 28 percent tax benefit to the regular good ol' American-as-apple-pie corporate tax rate of 35 percent. . . . I refer you to the decision last year by the doughnut chain Tim Hortons, a Delaware corporation, to reorganize itself as a Canadian corporation "in order to take advantage of Canadian tax rates." Hold that thought: "In order to take advantage of Canadian tax rates"—a phrase hitherto unknown to American English outside the most fantastical futuristic science fiction.
Another little-noticed provision in ObamaCare: Money for long-term care will be automatically deducted from worker paychecks unless employees opt out; it is an estimated $146/month payment to give $75 daily care; some cost estimates peg the deduction at $240/month. Cost at the lower figure is estimated at $100B.
Weekly Standard editor Matthew Continetti sums up what ObamaCare will do to Obama's historical reputation:
The liberal line is that President Obama has secured his place in history by signing into law the Patient Protection and Affordable Care Act of 2010. And secured it he has. Henceforth Obama will be remembered as the man who accelerated America’s mad dash toward bankruptcy. He will be remembered as the leader who promoted a culture of dependency. He will be remembered as the figure who sacrificed a dream of national unity upon the altar of big government liberalism. It’s true: Obama is now a president of consequence. And almost all of those consequences are bad.
The fiscal picture was bleak before Obama made it worse. Government debt is 60 percent of the gross domestic product and climbing. The deficit is projected to remain above 4 percent of GDP for the next decade. The week before the president signed his health care reform into law, Moody’s warned that America’s AAA bond rating may be downgraded. The day before the signing ceremony, the nation learned that Warren Buffett is a safer investment than U.S. treasuries. One needn’t look across the Atlantic, where a penniless Greece is a supplicant to the IMF, to see our future. Look to California, where the economy is crippled by high taxes, high spending, and burdensome debt....
Gone is the charismatic young man who told the 2004 Democratic National Convention in Boston that there was no Blue America and no Red America, only the United States of America. All that remains is a partisan liberal Democrat whose health care policy bulldozed public opinion, enraged the electorate, poisoned the Congress, and set into motion a sequence of events the outcome of which cannot be foreseen.
This tarnished White House complains incessantly about the crises it inherited from its predecessor. Crises? You ain’t seen nothing yet.
The latest public health care horror show from the UK--presaging America's ObamaCare future: nurses declining to bring a dying patient a glass of water.
CAN'T WAIT, CAN YE?
Bottom Line. Coupled with America's rapidly deteriorating financial position, ObamaCare is a massive, potentially fatal economic train wreck in the making.
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