How's Obama Going to Raise $4.3 Trillion?

[WhiskeyGirl]

How's Obama Going to Raise $4.3 Trillion?

by Alan Reynolds

This article appeared in the The Wall Street Journal on October 24, 2008.

The most troublesome tax increases in Barack Obama's plan are not those we can already see but those sure to be announced later, after the election is over and budget realities rear their ugly head.

The new president, whoever he is, will start out facing a budget deficit of at least $1 trillion, possibly much more. Sen. Obama has nonetheless promised to devote another $1.32 trillion over the next 10 years to several new or expanded refundable tax credits and a special exemption for seniors, according to the Urban Institute and Brookings Institution's Tax Policy Center (TPC)...

Mr. Obama's proposed income-based health-insurance subsidies, tax credits for tiny businesses, and expanded Medicaid eligibility would cost another $1.63 trillion, according to the TPC. Thus his tax rebates and health insurance subsidies alone would lift the undisclosed bill to future taxpayers by $2.95 trillion -- roughly $295 billion a year by 2012.

What in the health proposal encourages participants to use public healthcare dollars wisely?  I didn't see anything.

What in the proposal encourages healthcare providers to charge fair prices?  Prices in line with what other industrialized countries pay?  I didn't see anything.  I did note in one speech Obama says something like "providers are already being squeezed."  So, I don't see much hope for healthcare inflation reform in the next ten years.

A trillion here, a trillion there, and pretty soon you're talking about real money. Altogether, Mr. Obama is promising at least $4.3 trillion of increased spending and reduced tax revenue from 2009 to 2018 -- roughly an extra $430 billion a year by 2012-2013.

How is he going to pay for it?

Raising the tax rates on the salaries, dividends and capital gains of those making more than $200,000-$250,000, and phasing out their exemptions and deductions, can raise only a small fraction of the amount. Even if we have a strong economy, Mr. Obama's proposed tax hikes on the dwindling ranks of high earners would be unlikely to raise much more than $30 billion-$35 billion a year by 2012.

Besides, Mr. Obama does not claim he can finance his ambitious plans for tax credits, health insurance, etc. by taxing the rich. On the contrary, he has an even less likely revenue source in mind.

In his acceptance speech at the Democratic convention on Aug. 28, Mr. Obama said, "I've laid out how I'll pay for every dime -- by closing corporate loopholes and tax havens." That comment refers to $924.1 billion over 10 years from what the TPC wisely labels "unverifiable revenue raisers." To put that huge figure in perspective, the Congressional Budget Office optimistically expects a total of $3.7 trillion from corporate taxes over that period. In other words, Mr. Obama is counting on increasing corporate tax collections by more than 25% simply by closing "loopholes" and complaining about foreign "tax havens."

Read the rest here -

http://www.cato.org/pub_display.php?pub_id=9746

I read something the other day that suggested that China, in order to lure businesses to relocate, has a 10 year tax holiday.  How can the US compete with that policy?  Higher US tax rates on business?

Where will the jobs continue to go?  China, and places that are tax free to business?