About that $318 Billion Tax Hike

Rea Hederman / February 26, 2009

According to the Washington Post, President Obama plans to create a new health care trust fund that will cost $634 billion over ten years. The money for this fund will be generated by a massive tax increase on those earning over $250,000 in income. The Administration estimates that a total of $318 billion will be generated by this tax increase. According to the President’s Budget proposal, the plan will raise revenue by limiting the tax rate for itemized deductions to twenty-eight percent for tax filers over $250K.

This tax increase alone will boost the annual tax burden of these taxpayers by almost a fifth each year, and this is before President Obama lets the Bush tax cuts expire. It is not sustainable to try to pay for all the new government programs on such a small group of tax filers. There are less than four million tax filers with income over $250K. This one tax increase will increase their taxes by almost $8000 on average. There will be behavioral changes where these earners will shift their compensation into areas that are subject to less punitive taxation. (more…)