Hold Onto Your Wallets!

President Obama's budget is facing serious opposition, even in the Democratically-controlled Congress. (It seems there may be some remnants of sanity still present in that body after all!)

First, Obama went on a "sales trip" to try to garner public support for his budget (an extension of his "perpetual campaign.") That included his website pledge project, attempting to mobilize his supporters to promote his budget to friends and contacts, and appearances on TV entertainment and infotainment programs. It didn't work. (Seems the electorate is less enthusiastic about his specific programs than they were about his nebulous "Hope! Change! Improve! Invest!" rhetoric.)

Now that it's become evident to him that spending at these levels, generating deficits at these levels, has no potential for passage, he's focused on increasing the government's revenue. Today, they announced they will attempt to close the "revenue gap" (the difference between taxes owed, and taxes collected.) He also has appointed a commission to overhaul the tax code. This group has been given broad latitude ... claiming "the only constraint" is that taxes should not be increased in 2009 or 2010, and that taxes should not be increased on families making less than $250,000.

Watch out!

During the campaign, Obama defended his plan to deliver "tax relief" to 95% of the public, even though a substantial portion of the public pays no income tax. He claimed payroll taxes (including Social Security and Medicare, as well as other direct and indirect taxes) counted toward who received "relief."

Now, that position seems to be shifting ... only income taxes count when "no increase" is the standard.

The cap and trade proposal (which will almost certainly NOT be passed) is nothing more than a tax on carbon. That means everyone who consumes energy (gasoline, natural gas, electricity) will pay higher prices to offset the new 'tax' levied on the energy companies. (Personally, I would rather have them keep their $13 per week in "tax relief" than see gasoline, and all other forms of energy increased in price!)

The higher taxes (either through rates, reduction in deductions and "loopholes", etc.) that businesses will pay will be passed on to consumers (including those who previously qualified for "relief.") Corporations do not pay taxes; their owners and/or their customers do. Shareholders will demand a certain rate of return, and sell the stock to invest elsewhere if they don't get it. Companies don't want to see their stock price (and market capitalization) reduced, so the higher cost from the higher taxes is passed on to consumers.

We will ALL be paying higher taxes, whether we pay them directly to the government, or indirectly in higher prices so that companies can pay the government.

With respect to those making more than $250,000, the plan to return those rates to "the same ones paid during the Clinton administration" is no longer the complete story. Additionally, families in that bracket will see reduced (or eliminated) deductions for mortgage interest and charitable deductions. The effective tax rate they pay will be far greater than under Clinton.

These moves are, according to our President, "the right thing to do." However, little sense can be made from eliminating the mortgage interest deduction on those most able to buy new homes (especially when the housing market is in serious trouble in much of the nation.) Reducing the incentive for the wealthy to contribute to charity is also counter-productive. Charitable organizations provide a wealth of services to their communities (more efficiently and less expensively than government.)

In an attempt to play the populist, and appear to not favor businesses or the wealthy, President Obama is:
Punishing corporate trips and retreats (especially for "bail-out" recipients) - which had the unintended consequence of punishing resorts, conference centers, and the travel industry.
Reducing mortgage deduction- suppressing home sales and new (performing!) mortgages.
Reducing charitable deductions - inhibiting community services by non-governmental entities.
Raising business costs - increasing prices and suppressing employment.

We simply can't afford President Obama's budget, and we'll all pay more under his policies. It's becoming evident that the "change" we need refers not to his reform plans, but to the small portion of our income we'll be able to spend on what we want!