Taxes going up?

In the Washington Post appears an article by Lori Montgomery which reports that the Obama administration is considering going back on a campaign pledge to not raise taxes on the middle class.

First off, let me state that it is my opinion that the pledge was broken for the 1 in 5 American citizens who smoke when taxes were increased by about 60 cents a pack early in 2009. For example, I estimate that taxes on my family (my wife and I both smoke) went up by almost $1000 a year as a result. (When I have made this claim in the past, it was pointed out to me that I also benefited from the payroll tax decreases enacted as part of the stimulus bill. However I am self-employed and due to the method by which my earnings are structured, I do not qualify for as large a payroll tax decrease as the average citizen. Also, the payroll tax decrease is only a one year temporary tax decrease while the increased cigarette taxes are permanent.)

Second, let me state that I consider myself a fiscal conservative. As such, I am not opposed to some increase in my taxes to help balance the budget. I would not object to a reasonable tax increase as long as any tax increase was progressive in nature (little to no increase on the lower class, some increase for the middle class and a larger increase for the upper class) and all citizens were expected to pay what I describe as being their fair share depending on their annual income. What I object to is when my family is forced to endure targeted tax hikes (like the cigarette tax) which the majority of citizens manage to escape. In fact the cigarette tax hike is actually regressive in nature because, as the Center for Disease Control (CDC) reports, the lower a person's income the more apt it is for that person to be a smoker.

Why is such a tax increase necessary or justified? Well, as the Washington Post piece points out, it is highly unlikely that we are going to be able to eliminate the large deficit only through spending cuts. While I believe some spending cuts probably would become politically palatable, possibly even necessary as part of some grand compromise to eventually balance the budget, I believe that demands by some that we balance the federal budget only through spending cuts are unrealistic and unreasonable.

There are even some grounds for reasonable concern that the government projections for future deficit spending are grossly underestimated. On the Below the Beltway blog appears an article authored by Doug Mataconis that briefly explains some of the problems with the figures the Congressional Budget Office (CBO) is forced to use for its projections. I will point out that there also are problems with the figures used by the Concord Coalition to come up with their own deficit predictions. These predictions appear as a foil to counteract the CBO's rather rosy outlook. However these predictions include:

...that all expiring tax provisions (including those from 2009 stimulus package) are extended...

It is pretty unlikely that the expiring George Dubyah Bush tax cuts for the wealthy will be extended. Also, while perhaps it is possible that the Social Security payroll tax decreases might be extended for another year, or even two, if the economy does not quickly recover, it is highly unlikely this temporary tax cut will become permanent due to the challenges the Social Security system already faces. Both of these tax cuts involve significant sums of revenue.

Let me state that I think the reality lies somewhere in the middle. Not as rosy as the CBO projection nor as dire as the Concord Coalition's projection. But if reality is somewhere in the middle, then future reality is intolerable.

Quoting from the Washington Post piece I linked to earlier:

"If you rule out inflating our way out of the problem and defaulting on the debt, there are two ways: Cut spending or raise taxes," said William G. Gale, an expert on fiscal policy at the Brookings Institution. With more than 80 percent of federal spending devoted to politically untouchable programs such as Social Security, Medicare and Medicaid, he said, "it's going to be really hard to make significant headway on the spending side. So that means you've got to think about taxes."

So I am willing to pay my fair share of tax increases to balance the budget. While I am in favor of a progressive tax code, I do not think it is reasonable nor advisable to raise taxes on the wealthy alone. The middle class needs to pay its fair share of any tax increases as well. If one is in favor of a progressive tax system like I am, then increased taxes on the middle class is part of the equation.

I am also going to state that with the approximately $1,000 increased taxes on cigarettes my family already pays, I think my middle class family is already paying at least a significant portion of its fair share. Obama broke his campaign pledge to my family with one of the first pieces of legislation he signed into law. I do not think that is unreasonable for the 21% of middle class Americans (as reported by the CDC) who smoke to demand that we see a reduction of, or credit for, the increased tobacco taxes we already pay. While the 80% of Americans who do not smoke might not have a problem with increased tobacco taxes, I think the 20% who do might form a high enough percentage of the electorate to affect future election results.