The Year of the Tax Increase
In a piece for PolicyMic, I wrote today about the deluge of new taxes heading our way in 2013:
I’ve never personally cared for the practice of New Year’s resolutions. In my observation, most people don’t come close to living up to their goals. Moreover, if something is worth improving about yourself or your circumstances, why not take notice and do something about it no matter the day of the year? But in the spirit of the New Year, I’ve identified one resolution that we all will have to make whether we like it or not – to fork over more of our money to the government.
Obamacare included a number of taxes to pay for its new spending, many of which take effect in 2013. The most notable is a 3.8% surtax on investment income for top earners, which like all taxes on capital formation will negatively impact everyone through reduced economic growth. Also included is a hike to the Medicare payroll tax, a higher threshold before which those with significant medical bills can deduct their expenses, an excise tax on medical device manufacturers, and a cap on contributions to flexible spending accounts.
Unfortunately that’s just the tip of the iceberg. Everyone’s payroll taxes will be going up by 2 percentage points with the expiration of the two-year holiday.
The U.S. has the most progressive tax system in the developed world, as the big government European nations have figured out what we haven’t: You have to soak the middle class if you want to fund a large welfare state. They rely heavily on regressive VATs to fund their big spending, and some US politicians are already eyeing the same to support our bloated government as well.
Will 2013 be the year spendthrift politicians succeed in soaking the middle class with a VAT or other regressive and destructive tax, or will they finally reverse course and slow the runaway growth of government spending?
I only briefly touch on the so-called “fiscal cliff,” noting that the deal being reported represents exactly the sort of Republican cave that us more cynical conservatives expected. They’ll hike taxes on the rich, and get no spending cuts in return. In fact, the minor slowing of spending growth in the “sequester” has been put off a further two months. It’s increasingly apparent that the Republican party hasn’t the stomach to put the brakes on government spending, and are possibly cheering it on right along with the Democrats. So it’s not the “fiscal cliff” that ought primarily to concern us, so much as the path to Greece we are barreling down.