We thought tax reform meant lowering rates and broadening the base by eliminating or cutting back on various deductions, credits, and loopholes. That’s what the Bowles-Simpson commission proposed. That’s what Paul Ryan and David Camp are working on. And that’s the pro-growth model.

But President Obama unveiled a much different tax-reform vision in his much-anticipated debt speech on Wednesday. He would raise tax rates on upper-income earners and small businesses. He also would eliminate deductions and credits, or so called “tax expenditures.” The president referred to these tax-expenditure reductions as “spending cuts.” In his context, they most certainly are not. They are more tax hikes.

Basically, the president is giving successful earners and small-business filers a double tax hike. That’s what it really is.

Of course, the president’s formula of estimating higher revenues to lower the deficit is completely wrong. The reality is that higher tax rates will slow the economy, inhibit new start-up companies, penalize investors, and may very well lose revenues and increase the deficit.

In the latter part of his speech the president did mention some kind of middle-class and corporate tax reform. But he gave no specifics.

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It’s easy to laugh at former Sen. Alan Simpson’s bizarre malapropisms on Your World With Neil Cavuto. The Wyoming Republican appeard on the Fox News show earlier this week in his capacity as co-chairman of Barack Obama’s National Commission on Fiscal Responsibility and Reform. Early on in the segment (watch the whole interview here), Simpson went on a tear about the kids these days, claiming that

grandchildren now don’t write a thank-you for the Christmas presents, they’re walking on their pants with the cap on backwards listening to the enema man and Snoopy Snoopy Poop Dogg…

Well, maybe. Yes, it’ easy to laugh because it’s funny to see an old man make a jackass out of himself. Especially when he’s a senator (speaking of which, have you heard the one about Buffcoat and Beaver?)

But what’s more disturbing than Simpson’s tenuous grasp of rap music and youth fashion (backwards-facing baseball caps are like so 1990s, dude!) is the guy’s stalwart defense of Social Security. The senator had gotten hot under the collar about the ways in which budget reforms inevitably get stalled by people demagoguing the question of entitlement spending. Each party, said Simpson, claims that the other is planning to gut the nation’s federalized retirement system. Perish the thought, says Simpson. His commission wasn’t trying to kill Social Security. On the contrary:

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the latest jobs numbers, which put unemployment at 9.8%, and how plans by Obama’s deficit reduction committee may impact small businesses.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

Jobs Up 39,000, Well Below Hopes as Rate Hits 9.8%
Commission’s final deficit report preserves controversial spending cuts; panel to vote Friday on whether to endorse plan
Report of the National Commission on Fiscal Responsibility and Reform
Hotline Whip Count: Deficit Commission Looks Dead

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Back during the presidential campaign, Barack Obama proposed several tax increases. Some of those tax hikes, such as the proposed higher income tax rates on investors, entrepreneurs, small business owners, and other “rich” taxpayers, have received a lot of public attention.

But it’s also important to guard against stealth tax hikes, and Obama’s proposal to increase Social Security’s “taxable wage base” is a dangerous example. The video below explains the details of this scheme to subject more income to the Social Security payroll tax – and thus substantially increase marginal tax rates and penalize economic growth.

This issue has not received much attention in the past two years, and Obama hasn’t bothered to include anything specific in his budgets, but this may be about to change. The Chairmen of the President’s Fiscal Commission just put out a report endorsing a big increase in the scope of the payroll tax. And this was followed just today by a similar proposal for a steep tax hike from the Domenici-Rivlin Debt Reduction Task Force (as if copying Greek fiscal policy will lead to less red ink, but that’s another blog post).

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