Obama’s Tax Laden Budget an Exercise in Central Planning

President Obama’s proposed budget not only increases the deficit, it’s also loaded with tax hikes. Which means any spending cuts he may have proposed are offset by increased spending on his pet projects like green energy. His budget should be called the “New Economic Policy” after the Soviets. He seems to believe that he’ll somehow be better at directing an economy than the they were.

Americans for Tax Reform compiled a list of the new or increased taxes in the budget.

Raising the top marginal income tax rate (at which a majority of small business profits face taxation) from 35% to 39.6%.  This is a $709 billion/10 year tax hike

Raising the capital gains and dividends rate from 15% to 20%

Raising the death tax rate from 35% to 45% and lowering the death tax exemption amount from $5 million ($10 million for couples) to $3.5 million.  This is a $98 billion/ten year tax hike

Capping the value of itemized deductions at the 28% bracket rate.  This will effectively cut tax deductions for mortgage interest, charitable contributions, property taxes, state and local income or sales taxes, out-of-pocket medical expenses, and unreimbursed employee business expenses.  A new means-tested phaseout of itemized deductions limits them even more.  This is a $321 billion/ten year tax hike

New bank taxes totaling $33 billion over ten years

New international corporate tax hikes totaling $129 billion over ten years

New life insurance company taxes totaling $14 billion over ten years

Massive new taxes on energy, including LIFO repeal, Superfund, domestic energy manufacturing, and many others totaling $120 billion over ten years

Increasing unemployment payroll taxes by $15 billion over ten years

Taxing management capital gains in an investment partnership (“carried interest”) as ordinary income.  This is a tax hike of $15 billion over ten years

A giveaway to the trial lawyers—not letting companies deduct the cost of punitive damages from a lawsuit settlement.  This is a tax hike of $300 million over ten years

Increasing tax penalties, information reporting, and IRS information sharing.  This is a ten-year tax hike of $20 billion.

And we’re supposed to believe he’s moved to the center? As usual, he thinks the economy can be planned from Washington, DC. He believes he and his cronies can decide where to take money from and where to distribute it to and somehow it’s going to work.

Just take the energy sector. This administration is hell bent on destroying the oil industry in favor of the “green energy” industry, which is less an industry than it is a government sponsored enterprise. Politico reported how the administration will advance the green agenda after failing to sell a cap and trade scheme to a skeptical public.

For the first time, an Obama budget does not include any mention of cap-and-trade legislation. Instead, it emphasizes that it will try to tackle greenhouse gas reductions through several programs and policies, including EPA regulations.

The budget request boosts funding for low-carbon “clean” energy technologies – including nuclear power – and reiterates past efforts to increase the costs associated with oil and gas and other fossil energy production.

It includes funding support towards Obama’s goals of putting 1 million electric vehicles on the road by 2015, creating the “clean energy standard” outlined in his State of the Union address and reducing energy use in buildings 20 percent by 2020.

Obama also calls for the elimination of 12 tax incentives for oil, gas and coal companies, which the administration estimates would raise $46 billion over 10 years.

He also has billions in the budget to reorganize the agencies responsible for granting oil drilling permits. They will be issuing permits, but not for drilling.

The Energy Department’s budget gets a 12 percent increase, to $29.5 billion, over 2010 enacted levels. This includes doubling to six the number of Energy Innovation Hubs that will research rare earth materials, battery and energy storage and Smart Grid energy transmission. The department’s office of science gets $5.4 billion for long-term clean energy research and development and $500 million for the Advanced Research Projects Agency-Energy, or ARPA-E.

ARPA-E’s main funding, $389 million, was through the 2009 stimulus bill. The Republican continuing resolution unveiled Friday cuts ARPA-E to $50 million.

The budget request includes $73 million towards the goal of issuing permits for 9,000 megawatts of new solar, wind and geothermal energy generation on federal lands by the end of the calendar year.

Unbelievable. And the irony here is that he’s proposing drastically cutting home heating assistance, while his policies are driving up the costs of energy. Last week a former oil executive testified before the House Energy and Power Subcommittee and predicted that Obama’s energy policies will choke the economy.

“I believe that the decline” in drilling in the Gulf of Mexico “will be sharper and deeper than what anyone is currently projecting,” he told lawmakers. “We have made a horrible error as a country.”

Hofmeister was one of six energy experts testifying about the effect of Middle East political unrest, including the ongoing protests in Egypt, on the U.S. oil market. The panelists presented a gloomy view of the America’s energy future if restrictions on domestic production remain. The Obama administration lifted a moratorium on deep-water drilling in October, but the government has not approved any projects that would have been blocked by that ban.

“We have a real strangulation by regulation taking place for domestic production at the current time in this country,” Hofmeister said.

“It is “absolutely critical to reduce dependence on the Middle East,” he said.     He  said, for example, that if oil tanker traffic were shut down in the Strait of Hormuz, the price of crude would double or even triple rapidly.

This is central planning at its worst. It’s never worked in the past, and it’s not going to work now.

Update: The airline industry warned that if Obama’s budget is passed as is the cost of tickets will increase. They call it a “$2 billion tax on the flying public.”

Update 2: Obama’s policies have already forced a major oil company into bankruptcy. I rest my case.

Tags: 2012, budget, energy, green, hikes, increases, industry, obama, oil, tax