Net effect: 'tax cuts' are GOP code for 'tax shifts.'

Last night in his State of the Union address, the President suggested taxing some people's health care benefits to help pay to make health insurance more affordable for some other people.

What is remarkable is not that his vapid proposal about health care marks the first time he has addressed the problem of the uninsured in six years of his presidency, nor the fact that he suggested a tax increase.

No, it is that he is trying to do something that conservatives were very successful at twenty years ago. Shift taxation away from the wealthy onto the middle class.

The President did not say we should hurry up and get rid of his massive tax cuts that favored the wealthy. Nor did he say we should borrow the money, as he has done for everything from Iraq to the medicare presecription drug scam. No, he wants to fund his program by taxing people with employer provided health insurance. The threshhold sounds high enough, $7,000 per individual and $15,000 per family of health care benefits, but in fact with the rate of increase in premiums it is not unusual for people to receive this much in benefits and he didn't say whether this would just be the threshhold for premiums of whether actual payments made to health care providers would also figure into it.

To understand how profound this is, let's begin with the observation that Republicans are not against government spending, despite all their rhetoric. They have different spending priorities, such as funding wars and major military purchases, and multitrillion dollar giveaways in to already profitable companies in the pharmaceutical and energy sectors, to name a couple, but in the end they are even bigger on spending than the Democrats are (one reason why overall spending exploded under Bush much more quickly than it had had grown under Clinton.)

And if you spend, then there will be taxation. Either it will come now, as Democrats tend to feel, believing that we should pay for what we propose, or it will come later, for future generations to pay off our debt (as we've seen with the massive borrowing over the past few years.)

But what this does is, without revoking a penny of the previous tax cuts, create a new tax on people who may not be the ones who received the Bush tax cuts earlier this decade. So the net effect is that this is a tax shift. So when conservatives talk about 'tax cuts,' over a period of several years it will turn out not to mean 'cuts,' but rather 'tax redistribution.'

And it's not the first time this has worked for the GOP. For example. the 1981 Reagan tax cuts blasted a hole in the deficit that continued to grow throughout the 1980s until Bush I started to get things under control in 1991. Then the Clinton tax rates were set in 1993 with another tax hike (leading to a budget surplus and the most prosperous economy in decades, suggesting that conservatives who predicted a recession were way off the mark.) But the 1991 and 1993 tax hikes were 'across the board.' What this meant was that compared to 1980, the wealthy were still paying far less in taxes while the poor and middle class, who had not benefitted much from the 1981 cut, were now paying more.

And so it is here. I don't dispute the idea that taxing health care benefits to pay for what is officially being billed as an increase in the number of people covered is politically adroit, but in the end let's see how it, combined with the 2001 tax cuts, affects who pays taxes in America. My expectation is that taxes will as a net effect hit the middle class harder while the wealthy will still come out ahead on the exchange.

Why do we keep falling for this 'sucker punch?'

President's budget challenge-- sorry, Mr. President, we've already seen your 'fuzzy math'

Today, President Bush challenged Democrats on spending.

Well, there are certain areas where I would be all for a spending cut. Starting with the third of a trillion dollars we have dumped into Iraq since the war began. That is the first place where government spending should be slashed. Maybe we can get it to zero before the President leaves office-- wouldn't that be an accomplishment?

He claims he has a plan to balance the budget by 2012. Hmmm... Didn't he start with a balanced budget? No, actually he didn't. He actually started with a suplus well into the hundreds of billions of dollars. He also says he wants to preserve the Bush tax cuts (which would take a positive vote by Congress to extend; if Congress does nothing then they will expire on schedule and revert to the Clinton tax rates, which helped produce that surplus).

The President said he doesn't want 'politics as usual' and warned Congress against passing bills that are 'political statements.' Then he said that he wants a line-item veto. Um, excuse me Mr. President, you might recall that some years ago Congress did pass a line item veto. It was determined to be unconstitutional by the Supreme Court after two Republican lawmakers sued when Bill Clinton actually used it to veto a couple of their pet projects. So, you are asking for something that has already been declared unconstitutional, apparently for appearances. What was that about bills that are 'political statements?'

"We need to reform Social Security and Medicare and Medicaid so future generations of Americans can benefit from these vital programs without bankrupting our country," he said.

I have an idea for reforming Medicare. How about scrapping the turkey of a drug bill that your party passed and you signed three years ago, Mr. President? You know, the one that gives away trillions of tax dollars to pharmaceutical companies and really hasn't made prescription drugs any cheaper for American seniors?

As for Social Security, that could be fixed by eliminating the $90,000 cap on Social Security wages subject to taxation. How about it, Mr. President? Obviously the American people didn't like your privatization plan last year, so how about something different?