30 Mar 2009 Outrage of the Day: Obama Breaks Tax Pledge

Not that we’re surprised, but President Barack Obama has broken his pledge (see YouTube video above or go here or here) not to raise any kind of taxes on families earning less than $250,000 per year.

It took him until February 4, 2009 to break his promise; the tax hike he signed into law that day goes into effect tomorrow.

As Joseph Henchman of the Tax Foundation Tax Policy Blog noted today, tomorrow, the federal cigarette tax goes from 39 cents to $1.0066 per pack of 20 cigarettes. As Henchman pointed out last month, Bureau of Labor Statistics figures show that 95.8 percent of all expenditures on tobacco are made by people with household incomes under $150,000 annually.

Writing in 2007 for the National Center for Public Policy Research, David Hogberg, PhD pointed out that the plan — then merely a soon-to-be-vetoed bill; now, thanks to Congress and Barack Obama, federal law — to raise tobacco taxes to fund an expansion of the S-Chip program would “result in families whose income puts them in the bottom 15 percent of households funding benefits for children who are in families close to the top 25 percent of households.”

Here’s more of what David Hogberg pointed out at the time:

The legislation passed by Congress takes this unfair system and makes it regressive. First, much of the new funding for SCHIP comes from a large increase in the cigarette tax. As Table 1 shows, people with incomes under 200 percent of the poverty level smoke at rates higher than those with incomes above 200 percent of the poverty level.

Thus, the taxes to fund the expansion of SCHIP will fall disproportionately on those making under 200 percent of the federal poverty level.

It could be argued that this is a fair system if all children in families under 200 percent of the poverty level were eligible for SCHIP and if only those under 200 percent of poverty were eligible for SCHIP. But none of this new revenue goes to those under 200 percent of the poverty level; benefits for those children are already funded via other taxes. The added revenues from the cigarette tax are for the purpose of funding the expansion. Indeed, both SCHIP bills passed by Congress take the tax revenues from those under 200 percent of the poverty level and give it to those children who live in families above 200 percent of poverty, likely all the way up to 400 percent of the poverty level. Table 2 shows the income amount by family size for each poverty level.

It is not inconceivable that a parent with one child with an income of $13,690 will be funding benefits for two children in a family of four with an income of $82,600. In short, SCHIP expansion would result in families whose income puts them in the bottom 15 percent of households funding benefits for children who are in families close to the top 25 percent of households.

It is quite common for the political left to attack a flat tax as regressive. SCHIP expansion is expected to impose not only a flat tax on cigarettes, but it then to take the revenue from that tax and distribute it up the income ladder. It seems clear the political left has an agenda other than basic fairness when it supports SCHIP expansion.

(You can read the entire paper here.)

So, two weeks after taking office, Barack Obama broke his promise to not raise any form of taxes on people making under $250,000 per year, and the bill starts coming due tomorrow.

For only keeping his promise for a measly two weeks, Barack Obama gets today’s Outrage of the Day.

Hat tip: Carter Wood at ShopFloor.org for alerting me that the tax goes up tomorrow and and for a link to Joseph Henchman’s writing, and to Americans for Tax Reform for the video.