About one in eight U.S. workers who receive health benefits from an employer -- more than nine million workers -- could pay higher income taxes on benefits as part of a Senate proposal that aims to raise billions of dollars to finance health-care reform, according an independent analysis of the proposal.
A five-page presentation, obtained by FOX Business, was prepared by the chairman of the Senate Finance Committee, Sen. Max Baucus (D-Mont.), who is leading efforts by Senate Democrats to formulate funding alternatives for a reform plan. In the document, Baucus proposes “options to limit allowable tax free health benefits."
President Obama would be wise to reject this idea because it would political suicide as well as terrible blow to the economy. President Obama very famously, over and over, said that ONLY the top 5% of income earners would see their taxes rise. That's one in twenty. This proposal is one in eight.
There are promises that politicians make that they break and get away with. There are others that end their careers. You all remember when George HW Buh famously proclaimed in a debate "read my lips, no new taxes". Then, he raised taxes. Then, he got voted out.
If President Obama raises taxes on any more people than the top five percent, that would be a similar back peddle on a similar promise. Taxes are one thing that you never want to go back on your word on. The minute you start taking more money from people than promised you not only lose popularity but credibility. It's even worse for the president because he butchered John McCain during the campaign for raising a similar proposal.
Once the president's credibility is lost, it opens up all sorts of attack points for the Republicans. With deficits at unsustainable levels, the Republicans will be free to argue that other tax increases are just around the corner. The president will no doubt make a counter argument but once you go back on one promise it's hard to believe anything else you say.
Soon, the Republicans can and will paint President Obama as Michael Dukakis and Walter Mondale reincarnated with charisma. He will be painted as a typical tax and spend liberal. Those were death blows for both those candidates and they will be for President Obama.
Economically, raising taxes this many working folks during a recession or even at the beginning of a recovery is just plain asinine. Just imagine if millions of workers now have to figure out what to do about their health insurance. With millions facing increased taxes, that would stunt consumer spending. It's basic economics. Raising taxes is contractionary. We want to be expansionary. Tightening an economy that is tightening without you only perpetuates the problem. Such a move would mean an extended recession at best and a depression at worst.