What Obama Won't Say: Your Taxes Are Going Up

When President Obama speaks tomorrow night, here's what he won't say: your taxes are going up. OK, maybe the lowest echelon on taxpayers will be spared, but anyone who does the simple math can see that the amount of money necessary to finance health care reform, along with existing government obligations, means that taxpayer liability is going up -- and not just for the rich.

According to the CBO, the US budget deficit is expected to rise by something close to a gazillion dollars. OK, the White House expects the ten-year budget deficit to reach $9 trillion, up from the original estimate of $7.1 trillion. Given that there are few plans to cut anything out of the budget, the alternative is to raise taxes.

What the president won't say about health care reform is the following: there are not enough rich people to float the country's needs right now. This is not a political statement; it's a fact. This chart from last week's Wall Street Journal demonstrates the point that to close the budget gap over the next ten years, tax rates on the rich would need to rise to nearly 69%. Even if you think that would be a good idea, it just isn't going to happen.

So where do we go from here? Well, the former investment adviser in me says that rather than fight the concept, embrace higher taxes as a likelihood and adjust your life as much as possible. That means maxing out retirement accounts; using tax efficient vehicles like index funds or ETFs; and limiting dividend and capital gains as much as possible. Far better to prepare for the eventuality than screaming, yelling and belly-aching about it.

Follow Jill Schlesinger on Twitter: www.twitter.com/jillonmoney

Comments

[sonofsamphm1c]

07:23 AM on 09/10/2009

First, from where did the notion of a ten-year goal to close the 9.1-trillion-dollar gap come?

Want to scare somebody, show them what there monthly mortgage payment would be on a 10-year mortgage, and then tell them the percentage by which their annual income would have to rise in order for them to close the gap. There are reason why we use 30-year mortgages.

It would do wonders if people could clearly see that the deficit was declining each year. The gap doesn't have to close in 10 years; in fact, it may be prudent that it never actually closes.

[Jill Schlesinger]

10:57 AM on 09/10/2009

Agreed that the gap does not have to close, but perhaps a great lesson of the Clinton years is that addressing deficits can be beneficial for the economy and markets.

[harry greb]

02:07 PM on 09/09/2009

If what you say is true, then Obama must satisfy himself with one term. He was elected with a mandate for CHANGE. He was elected to end these wars that have accomplished nothing but enriching war profiteers and drained the treasury. He was supposed to stop these bailout give-aways to the very people who've ruined the economy. He was supposed to reform healthcare on the backs of the 1/10th of one percent of the ultra-wealthy who've engineered the largest confiscation of wealth in history. If he instead decides to increase the burden on the working people of the country, then a 3rd party candidate will fill the vacuum and carry the populist banner, editors-at-large notwithstanding.

[Jill Schlesinger]

11:01 AM on 09/10/2009

harry: interesting take--maybe once you get in to the Big Seat, it's just too hard not to want to stay there...

[Azsin]

11:50 PM on 09/08/2009

whatever we do to get the budget and defict under control
Obama and the dems must hammer any Gop memeber who stood by and voted quickly and queitly about bushs tax cuts
they didnt not work at all
slowly but sure return tax rates to clinton era rates then to pre reagan eras
the problem people forgets is we are an older nation
have to pay for our seniors
our infrastucture build in the 30s 40s and 50s werent designed to be there forever they need work
and worst of all people wouldnt actullay be "losing" money
50 60 bucks a year for most people isnt much especialy with people saving more and spending less on things they dont need with credit cards or high interest loans

people just need to stop listing to the fears mongering of tax and spend

its not tax and spend
its help and security

[drkazmd65]

02:12 PM on 09/09/2009

Exactly Azsin - even though raising tax rates on the 'middle class' (those making

[Jill Schlesinger]

11:00 AM on 09/10/2009

Azsin: I think that many people (including my father, a Wall Street veteran of over 40 years, are willing to pay more to address health care needs. While I understand the political difficulty of saying some of these things about taxes, it just seems like a no-brainer to me.

[mld678]

07:24 PM on 09/08/2009

With the U.S. economy struggling, we need policies that will spark immediate business investment and encourage capital investment. We must continue to create overseas opportunities for American companies and chip away at the deficit by taking steps to control wasteful governmental spending. Read and learn about policies that need attention at http://www.friendsoftheuschamber.com/issues/index.cfm?ID=104 .

[Jill Schlesinger]

04:31 PM on 09/08/2009

I'm a big fan of pragmatism...:)

[Aerows]

02:22 PM on 09/08/2009

If there is enough money to spending killing people, there is enough to start providing health care to all Americans.

Here's another radical thought - how about we stop providing food, house and medical care for the people we have locked that do nothing more than smoke marijuana or deal it?

If someone can't find money to provide health care out of just those sources, they aren't looking very hard. The definition of insanity is continuing to do the same thing, and expecting different results. Looking at both of those situations pragmatically could change the debate, because it will change our spending priorities.

[rabb046]

09:59 PM on 09/08/2009

Here's another radical thought. Forget the ridiculous stereotyping and legalize the marijuana.
Let the government tax and regulate it.

http://www.taxandregulate.org/

http://www.latimes.com/features/image/la-me-pottax24-2009feb24,0,4756579.story

http://www.taxcannabis2010.org/

http://www.veryimportantpotheads.com/