In 2008, Barack Obama frequently made this promise to American voters: "I pledge that under my plan, no one making less than $250,000 a year will see any type of tax increase. Not income tax, not capital gains taxes, not any kind of tax." But as Obama’s first term comes to a close, that has clearly not been the case. In fact, one of his very first acts as president was to raise taxes on products consumed primarily by those whom he promised not to raise taxes on. Below is a general list of taxes raised by President Obama in his first term.
Product and Service TaxesOne of President Obama’s first acts as President in February of 2009 was to more than double the taxes on tobacco products. This affected about 60 million Americans and disproportionally hurt poor and middle class families. Cigarette taxes jumped from $3.90 to more than $10 per carton. Cigar smokers, meanwhile, saw their taxes increased by over 4,000%. Not only was this a major tax increase, but it mostly harms those making less than $250,000 and living at or below the poverty level. According to the Center for Disease Control, in 2010 about 33% of people living below the poverty level were smokers.
A second anti-consumer tax was found in ObamaCare and it levied a 10% tax on tanning bed services, affecting about 30 million Americans. Obviously, a vast majority of these users fall below the richest 1% and make less than $250,000 per year, meaning another broken promise not to raise taxes on those making less than $250,000. In both instances, President Obama decided to target certain and specific products or services he deems unhealthy and levied heavy taxes on them. Under this reasoning products such as potato chips, sodas, violent video games, and football equipment might be subject to heavy federal taxation in the near future.
Obamacare Tax IncreasesThe largest grouping of taxation can be found in ObamaCare, the president's signature legislation. While the president has attempted to declare that the most controversial portion of the bill - the individual mandate - is not a tax, both the US Supreme Court and his own lawyers have determined otherwise. In fact, the Obama administration argued in front of multiple courts in defense of the law that the individual mandate was constitutional as it was a tax. At the Supreme Court, it was argue that "the legislative history is replete with members of Congress explaining that this law is constitutional as an exercise of the taxing power... Not only is it fair to read this as an exercise of the tax power, but this Court has an obligation to construe it as an exercise of the tax power, if it can be upheld on that basis." The individual mandate will almost exclusively affect those making less than $250,000.
Punishing Responsible HealthCare Users through TaxationThrough Obamacare, the president also raised a number of taxes that have negative effects on responsible taxpayers and those who have been fair participants in the system. Ironically, Obama not only implements the individual mandate tax to punish those who do not purchase health insurance, he also implements a tax on those who are too responsible in purchasing insurance.
First up, Obama imposed a new $2,500 maximum contribution limit for Flexible Spending Accounts. Flexible Spending Accounts enable employees to direct funds from their paychecks on a pre-tax basis to an account used specifically for medical purposes during that year. Simply put, responsible people who had expected expenses coming up in a given year, perhaps a pregnancy or major dental surgery, could put money into a Flexible Spending Account and immediately pay those bills.
In addition to severely limiting the contribution amounts to Flexible Spending Accounts, Obama also raised the limit where families become eligible to write off medical expenses. This ObamaCare provision increases the write-off threshold by 25% to 10% of adjusted gross income. Not surprisingly, this also almost exclusively affects those making under $250,000. A family of 4 making $65,000 with medical bills of $6,000 would have been able to write off those expenses prior to the passage of ObamaCare. Under his new rules, that family is no longer experiencing “high medical costs” and will be forced to pay taxes on those expenses. Wealthier families would not have met either minimum anyway and are therefore unaffected by the passage.
Also as a result of the passage of ObamaCare, individuals making $200,000 per year will see their Medicare taxes increase by 66%, to 2.35%, while self-employed individuals will pay a Medicare rate of 3.8%.
Other Trickle Down Tax IncreasesPresident Obama has also implemented a number of other tax increases that will directly affect consumers, even if they don’t technically pay the taxes themselves. One example is a 2.3% tax on medical device makers. Pacemakers, prosthetic limbs, and monitoring devices will all be subjected to this new tax. Is it more reasonable to assume that the medical device suppliers will simply just absorb this tax or pass it on to the consumers of those products, the patients?
At the same time, Obama has been fighting his entire first term to eliminate the Bush tax cuts, but only for those making more than $250,000. Of course, this figure would include hundreds of thousands of small business owners, independent medical practices, and other job creators. Will these small business owners simply absorb the higher taxes or will they pass on those taxes through increases in the price of their products and services? And while $250,000 may seem like a lot of money, it is also important to remember that small business usually pay far higher taxes than regularly-employed workers. They are required to pay both the employee and employer side of both Medicare and Social Security, have to pay for employee unemployment insurance, and of course, new Obamcare mandates.