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Monday, July 16, 2012

FactCheck.org: Is ObamaCare the Biggest Tax Increase in American History?

FactCheck LogoFactCheck.org:  Biggest Tax Increase in History?:

Will “Obamacare” be the largest tax hike in US history?

Several readers have asked us about this since Rush Limbaugh made a hugely exaggerated claim that the new health care law is “the biggest tax increase in the history of the world.” ...

is this increase the largest in American history? Perhaps -- as measured by the rather useless yardstick of raw dollars, with no adjustment for inflation. We rely here on recently updated tables from U.S. Treasury Department tax analyst Jerry Tempalski, whose 2006 paper on “Revenue Effects of Major Tax Bills” is the standard reference for making such comparisons. ...

By this measure, the Affordable Care Act’s $76.8 billion in revenue increases tops the $65.9 billion for the highest single year for Bill Clinton’s 1993 deficit reduction bill, which Republicans have for years attacked as the biggest in history. But as we’ve said before, that attack is misleading, and the raw-dollar measure is a poor way to measure the size of a tax increase.

For one thing, that measure doesn’t take account of inflation. Using “constant” dollars -- all adjusted to equal the value of a dollar in 2009 -- the ACA drops to fourth place, and the tax increase signed in 1982 by President Reagan becomes the largest since 1968.

But even this measure takes no account of a population that is steadily rising. Today’s population is 82 million higher than it was at the time of Reagan’s 1982 increase, and 56 million higher than it was when Clinton signed the 1993 increase. So the average tax increases in those years was accordingly higher on a per-person basis than the ACA.

Incomes are also up since those times -- even adjusting for inflation, and despite declines since the economic crisis of 2008. So the effect on the average person’s paycheck would be reduced even further, compared to earlier increases.

So what is the best yardstick for measuring changes in taxation?  “The single best measure for most purposes is probably the revenue effect as a percentage of GDP, because it eliminates the effects of inflation, real economic growth, and the size of total federal receipts,” Tempalski wrote in 2006. We concur, as do most tax experts we know of.

And by that measure, the revenue increases in the ACA are smaller than most of the increases enacted since 1968 -- and less than one-quarter the size of the largest.

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Comments

The most accurate measure of this particular tax increase is its spending increase. Spending must be paid by taxes sooner or later. The spending increases under ACA/Obamacare will far outstrip the rosy initial projections.

Posted by: AMTbuff | Jul 16, 2012 5:00:08 AM

The facts obviously have a Democratic bias!

Posted by: GaryD | Jul 17, 2012 1:07:49 AM