Raising Capital Gains Taxes for Purposes of “Fairness” In an April 2008 Democratic primary debate, candidate Obama was asked, by journalist Charlie Gibson, a question about his proposal to nearly double the capital gains tax (from 15 percent to 28 percent). Said Gibson: “… In each instance when the rate dropped [in the 1990s], revenues from the […]
Raising Capital Gains Taxes for Purposes of “Fairness”
- In an April 2008 Democratic primary debate, candidate Obama was asked, by journalist Charlie Gibson, a question about his proposal to nearly double the capital gains tax (from 15 percent to 28 percent). Said Gibson: “… In each instance when the rate dropped [in the 1990s], revenues from the tax increased. The government took in more money. And in the 1980s, when the [capital gains] tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?” Obama replied that he wished to raise the tax “for purposes of fairness.” “We saw an article today,” he explained, “which showed that the top 50 hedge fund managers made $29 billion last year…. [T]hose who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That’s not fair.”
Low Ratings for Senator Obama’s Tax Policies
- The National Taxpayers Union—an organization that “seeks to reduce government spending, cut taxes, and protect the rights of taxpayers”—gave then-Senator Obama ratings of zero percent, 16 percent, and “F” in 2005, 2006, and 2007, respectively.
- Americans for Tax Reform—which “believes in a system in which taxes are simpler, fairer, flatter, more visible, and lower than they are today”—gave Obama a zero percent rating in 2005 and a 15 percent rating in 2006.
- The Small Business & Entrepreneurship Council—which “works to influence legislation and policies that help to create a favorable and productive environment for small businesses and entrepreneurship”—gave Obama a rating of 9 percent in 2005.
- The National Federation of Independent Business—which seeks“to impact public policy at the state and federal level and be a key business resource for small and independent business in America”—gave Obama a rating of 12 percent in 2005-2006.
- The Business-Industry Political Action Committee—which “supports pro-business candidates who have demonstrated the skill and leadership necessary to fuel a pro-business Congress”—rated Obama 15 percent in 2005 and 10 percent in 2006.
Ernst & Young Says President Obama’s Proposed Tax Hikes Will Greatly Harm Economy
- In July 2012, Ernst & Young—a global leader in assurance, tax, transaction and advisory services—examined four sets of Obama tax proposals: (a) the increase in the top two tax rates from 33% to 36% and 35% to 39.6%; (b) the reinstatement of the limitation on itemized deductions for high earners; (c) the taxation of dividends as ordinary income; and (d) an increase in the Medicare tax for high-income taxpayers (from 2.9% to 3.8%), and the application of a new 3.8% tax on investment income. The Ernst & Young report concluded that “the higher tax rates will have significant adverse economic effects in the long-run: lowering output, employment, investment, the capital stock, and real after-tax wages when the resulting revenue is used to finance additional government spending.” All told, Ernst & Young estimate that Obama’s tax plan will kill 710,000 small business jobs.
- Most small businesses pay their taxes using individual tax rates; thus, If individual tax rates are raised, small business tax rates are raised as well.
Obama’s Plan for a Tax Hike Is Blocked by Senate Democrats
- In July 2012, Senate Democrats blocked a vote on President Obama’s proposal to raise taxes on those earning more than $250,000 per year. Senate Republicans had proposed taking two immediate votes—one to extend the Bush-era tax cuts (for all Americans) in their totality, the other to raise taxes as per Obama’s plan. The Democrats, aware that Obama’s plan was politically toxic, refused to bring either measure to a vote.
Obama Lies About His Record on Tax Hikes
In a nationally televised February 6, 2011 interview with Bill O’Reilly, Obama stated: “I didn’t raise taxes once. I lowered taxes over the last two years.” The following day, Mark Levin of Americans For Tax Reform debunked Obama’s “blatantly false” statement, noting that the president had signed into law at least two dozen tax increases. For example:
- On February 4, 2009—just 16 days into his presidency—Obama signed into law a 156% increase in the federal excise tax on tobacco, thereby violating his “firm pledge” that no American making less than $250,000 would see “any form of tax increase.” The median income of smokers is slightly more than $36,000.
- In March 2010, Obama signed the healthcare reform bill into law, thereby enacting two dozen new or higher taxes (at least seven of which violated his “firm pledge” on taxes):* Employer Mandate Excise Tax
* Small business 1099-MISC Information Reporting
* Surtax on Investment Income
* Excise Tax on Comprehensive Health Insurance Plans
* Hike in Medicare Payroll Tax
* Medicine Cabinet Tax
* HSA Withdrawal Tax Hike
* Flexible Spending Account Cap – aka “Special Needs Kids Tax”
* Tax on Medical Device Manufacturers
* “Haircut” for Medical Itemized Deduction from 7.5% to 10% of AGI
* Tax on Indoor Tanning Services
* Elimination of tax deduction for employer-provided retirement Rx drug coverage
* Blue Cross/Blue Shield Tax Hike
* Excise Tax on Charitable Hospitals
* Tax on Innovator Drug Companies
* Tax on Health Insurers
* Biofuel “black liquor” tax hike
* Codification of the “economic substance doctrine”
- The second part of Obama’s claim—that he had “lowered taxes over the last two years”—rested merely upon some temporary tax relief he had signed into law. The tax cuts he enacted—such as the temporary payroll tax holiday—were mostly short-term and conditional. By contrast, the tax increases Obama had signed into law were mostly permanent. Indeed, he had signed into law $7 in permanent tax hikes for every $1 in permanent tax cuts.
Obamacare: The Biggest Tax Hike in American History
- On June 28, 2012, the Supreme Court upheld the constitutionality of Obamacare, particularly its core provision—the so-called “individual mandate” under which most Americans would be required to buy health care insurance with at least the minimum amount of coverage stipulated by the federal government or pay a fine. Although the Obama administration had tried to characterize the individual mandate as a legitimate exercise of congressional power under the separate Commerce Clause of the Constitution, the Court’s opinion rejected that approach and opted to call the fine, imposed on individuals who decide not to buy health insurance despite the mandate, a tax—within the taxing authority of Congress. As Chief Justice John Roberts wrote, that “Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”
- Obamacare will force small businesses with more than 50 employees to purchase “qualifying” health insurance. If they fail to do so, they will be required to pay a tax of up to $2,000 per employee.
- In September 2012, the Congressional Budget Office released a report estimating that 6 million people would be subject to the Obamacare “individual mandate” tax, which would cost them approximately $7 billion in taxes per year. According to the Washington Examiner, most of those 6 million are in the middle class (with incomes below “$60,000 for individuals and $123,000 for families of four). In 2008, Obama pledged that “no family making less than $250,000 a year will see any form of tax increase—not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”
- The individual mandate is just one of many new taxes imposed by Obamacare. According to an analysis by the nonpartisan Congressional Budget Office, Obamacare as a whole constitutes the largest tax hike in American history—and it affects mostly people in the middle class.
Obamacare’s Massive Taxes on the Middle Class
Forbes.com identifies the following 7 taxes that Obamacare will impose on people earning less than $250,000 per year:
- Individual Mandate Excise Tax: “Starting in 2014, anyone not buying ‘qualifying’ health insurance must pay an income tax surtax. It goes up each year until 2016 and beyond when a couple would pay a tax of the higher of $1,360 or 2.5% of adjusted gross income.”
- Over-The-Counter Drugs Trap: “Since Jan. 1, 2011, employees with health savings accounts, flexible spending accounts, or health reimbursement accounts have no longer been able to use pre-tax funds stashed in these accounts to buy over-the-counter medicines for allergy relief and the like without a doctor’s prescription (there’s an exception for insulin).”
- Healthcare Flexible Spending Account Cap: “Starting Jan. 1, 2013, employees will face a $2,500 cap on the amount of pre-tax salary deferrals they can make into a healthcare flexible spending account. There is no cap under current law.”
- Medical Itemized Deduction Hurdle: “Starting Jan. 1, 2013, taxpayers who face high medical expenses will only be allowed a deduction for expenses to the extent they exceed 10% of adjusted gross income, up from 7.5% now. Taxpayers 65 and older can still use the old 7.5% threshold through 2016.
- Health Savings Account Withdrawal Penalty: “Since Jan. 1, 2011, taxpayers who withdraw money from health savings accounts for non-medical expenses before age 65 face a 20% penalty, up from 10% before.”
- Indoor Tanning Services Tax: “Since July 1, 2010, folks using indoor tanning salons face a new 10% excise tax.”
- Cadillac Health Insurance Plan Tax: “Starting in 2018, there will be a new 40% excise tax on taxpayers who are covered by high-cost health insurance plans (with premiums at or above $10,200 for a single or $27,500 for a family). Insurers or employers who are self-insured will pay the tax, but it is expected to trickle down to mean higher costs for consumers.
Obamacare Will Raise Self-Employment Tax Rate
- The healthcare reform bill will raise self-employment tax from 2.9% in 2012 to 3.8% in 2013. This increase, coupled with the rise in the top marginal income-tax rates described above, would raise the marginal income-tax rate on small business profits from its current level of approximately 38%, to about 43% in 2013. This would be devastating to small employers, most of whom have thin profit margins. According to Fox News, “A company with $1 million in profits facing a higher tax rate of 5 percentage points will be saddled with another $50,000 in taxes.”
Obamacare Medical Device Tax
- This 2.3% tax will take effect in 2013 and will affect companies that manufacture devices such as prosthetic limbs, pacemakers, and operating tables. Expected to bring in $20 billion in annual revenues, this tax will be levied on gross sales and thus must be paid even by companies that do not earn a profit in a given fiscal year. The medical-device industry employs 409,000 Americans in 12,000 plants nationwide; many of these incur losses for several years before they are able to turn a profit.
Obamacare Investment Surtax
- “Also taking effect in 2013,” says a Fox News report, “this tax increase captures those few small business owners not covered by the self-employment tax hike: owners of Subchapter-S corporations and limited partners. These owners are currently exempt from self-employment tax, mostly because they are investors rather than proprietors. But Obamacare sweeps them into the IRS net too, forcing them to pay the 3.8 percentage point tax as an ‘investor surtax.’ This will make it far more difficult for investors to raise money to start up small firms. An investor is going to need to see even greater small business profit projections to overcome this higher ‘hurdle rate’ of taxes. Not only does a small business owner have to give his investor a strong return on his investment, he now has to do it with a giant tax mill around his neck.”
Obama Proposes Death Tax Increase
- As of 2012, the estate tax—or “death tax”—has a top rate of 35% and a “standard deduction” of $5 million ($10 million in the case of a married couple or surviving spouse). President Obama calls for raising the rate to 45%, and reducing the exemption to $3.5 million. A Fox News report explains the implications of this measure: “When a family business owner dies, it’s up to the surviving family members to pay the death tax to the government. Needless to say, many successful, job-creating small businesses simply won’t survive this process. Such families will have little choice but to sell the business (and lay off all the employees) in order to pay the IRS. Or they will have to pay a small fortune to lawyers, accountants, and the life insurance industry to avoid this fate.”
Obama’s Massive “Cap & Trade” Tax Hike That Was Averted by Congress
- In a February 2009 speech to Congress, President Obama called for the implementation of a cap-and-trade environmental/energy plan designed to reduce carbon emissions. The cap-and-trade legislation (known officially as the American Clean Energy and Security Act of 2009, or the Waxman-Markey bill, in honor of its congressional sponsors) would have established an economy-wide cap on carbon emissions and then permitted companies to buy or sell emission “credits.”
- Robert Murphy, author of The Politically Incorrect Guide to Capitalism, explained the mechanism by which cap-and-trade would impose costs on the American public: “Under a cap-and-trade scheme, the government sets an absolute cap on how much carbon dioxide industries can emit in the United States, and it enforces this cap by selling a limited number of allowances. All of the operations (utilities, factories, etc.) covered by the law must turn in the appropriate number of allowances based on how much carbon dioxide they release into the atmosphere each year. The government gets its revenues from auctioning off these allowances to the highest bidder.”
- The ultimate result of cap-and-trade would be carbon rationing, since there would be a fixed number of carbon allowances available to American businesses as a whole. Such rationing would dramatically raise the operating costs of many businesses, which in turn would pass those costs on to their customers. According to the Heritage Foundation, the average American household would incur additional costs ranging from $1,870 to $6,970 per year. An MIT study placed the figure at $3,100. A March 2009 U.S. Treasury Department document said “a cap and trade program could generate federal receipts on the order of $100 to $200 billion annually.” That is the equivalent of raising personal income taxes by approximately 15%, or $1,761 a year, per household.
- In 2008, candidate Obama readily acknowledged that cap-and-trade would impose significantly higher energy costs on Americans of all income levels: “[U]nder my plan of a cap-and-trade system, electricity rates would necessarily skyrocket.”
- On June 26, 2009, the House of Representatives gave President Obama what he wanted, passing a cap-and-trade bill that called for the U.S. to cut its emissions of carbon dioxide by 83% over the next 41 years. By 2050, the average American would be allowed the same level of emissions as was produced by a citizen in 1867. Environmental groups celebrated, but the bill was extremely unpopular with the American public at large. Therefore, the bill was never passed by the Senate and did not become law, thereby preventing Obama from imposing an enormous tax on the American people.
- Thus rebuffed by Congress, Obama next sought to impose cap-and-trade by circumventing the legislative process and imposing cap-and-trade through edicts by his Environmental Protection Agency (EPA). In March 2012, for example, the Obama EPA issued a final rule limiting greenhouse-gas emissions from electric utilities to no more than 1,000 pounds of carbon dioxide per megawatt of electricity produced—far below the 1,768 pound-average of existing coal plants. As Bonner Cohen, senior fellow with the National Center for Public Policy Research, writes: “The rule requires future plants to use as yet non-existent carbon capture and control technologies to cut their emissions to the new standard. With no technology available to bring down CO2 emissions to the new standard, EPA, in the name of combating climate change, is effectively telling the coal industry, which produces 55 percent of our nation’s electricity, that its days are numbered.”
Obama’s Devotion to Failed “Keynesian” Economic Policies
- President Obama is an adherent of what is known as Keynesian economics, named after the early-to-mid-twentieth century economist John Maynard Keynes. As Forbes magazine contributor Peter Ferrara explains: “The [Keynesian] idea is that the increased government spending and deficits will increase demand in the economy for more production, and that producers will increase supply to meet that demand, hiring more workers and reducing unemployment in the process. Keynesian economics arose in the 1930s in response to the Depression. It never worked then, as the recession of 1929 extended into the decade long Great Depression. And it never worked anywhere it’s been tried since then, in the U.S. or abroad. By the 1970s, Keynesian policies had produced double digit unemployment, double digit inflation, and double digit interest rates, all at the same time, along with four successive worsening recessions from 1969 to 1982. Keynesian monetary policy involves running up the money supply to increase demand, with artificially lowered interest rates promoting more spending. That is where the inflation came from.”
- Ferrara then explains: “Ronald Reagan explicitly scrapped Keynesian economics for the more modern supply side economics, which holds that economic growth results from incentives meant to boost production. That results from reduced tax rates, which enable producers to keep a higher proportion of what they produce. It results from reduced regulatory costs, which also increases the net reward for increased production. And it results from monetary policies maintaining a strong, stable dollar, without inflation, which assures investors that the value of their investments will not be depreciated by inflation or a falling dollar, or threatened by repeated recessions resulting from policy induced boom/bust cycles, as in the 1970s…. [Under Reagan] inflation was quickly whipped, cut in half by 1982, and in half again by 1983, never to be heard from again until recently. At the same time … the economy took off on a 25-year economic boom from 1982 to 2007, interrupted by just two, short, shallow recessions, widely recognized in the economic literature, and by the National Bureau of Economic Research, as one long boom. During the first 7 years of that boom alone, the economy grew by almost one-third, the equivalent of adding the entire economy of West Germany, the third largest in the world at the time, to the U.S. economy.”
- Adjusting for inflation, more wealth was created in America during that 25-year boom than in the previous 200 years combined.
- From 2002-2007, the growth in the U.S. economy was the equivalent of adding the entire economy of China to the American economy.
- In light of these facts, Ferrara notes that “Obama has turned out to be the most regressive, backward looking President in American history, taking us back to the failed, discredited Keynesianism of the 1930s to 1970s, as if nothing at all interesting happened from 1980 to 2007…. Obama’s first major act in office was to pursue the unreconstructed Keynesianism of the nearly $1 trillion so-called ‘stimulus,’ which we now know didn’t stimulate anything except government spending, deficits and debt. Obama promised us at the time that if his ‘stimulus’ bill passed, the unemployment rate would never exceed 8%, and would decline to 5.8% by May of . But in reality it was 8.2% and rising in May.”
- Obama articulated his devotion to Keynesian economic policies when he stated, in December 2009, that America must continue to “spend our way out of this recession.”
The Disastrous Auto Industry Bailouts
- During the 2012 presidential campaign, President Obama has boasted that the automobile industry is “back on its feet” and “repaying its debt, gaining ground.” He contends that if his administration had not infused $80 billion into the financially troubled General Motors and Chrysler, both companies would have gone bankrupt, shut down their factories, sold all their assets, and liquidated. In turn, this would have had enormous consequences for auto parts suppliers and dealerships, which would have been forced to lay off a combined 1 million workers. Vice President Biden has used more colorful language to congratulate himself and the President for their professed successes: “Osama bin Laden is dead and General Motors is alive.”
- The auto-industry bailouts originated in late 2008, during the waning weeks of George W. Bush’s presidency, when then-Treasury Secretary Henry Paulson took $17 billion from the $700 billion Troubled Asset Relief Fund and lent it to General Motors and Chrysler. Upon taking office, President Obama established an auto task force headed by “car czar” Steve Rattner.
- Many experts believe that at least GM could have obtained private bankruptcy financing if it had presented a feasible restructuring plan that dealt with the unsustainable costs of its unionized work force ($58 per hour, including benefits).
- As Reason magazine points out: “Absent the bailout, these companies would have survived, but they would have looked very different. They might have merged into one, pooling resources and slashing excess capacity from the industry. Alternatively, entrepreneurs might have purchased their more viable brands and run them as independent companies, breaking up the industry’s big vertically-integrated players into myriad smaller ones. Either way, the labor and capital squeezed out from the industry would have been more productively deployed elsewhere. History offers examples: A bankruptcy-triggered reorganization of the steel industry three decades ago led to an 18 percent increase in employment in the plastic industry, which replaced steel for some uses.”
- But instead, the Obama administration used taxpayer dollars to take control of the bankruptcy process, stand bankruptcy law on its head, and protect the labor unions that have long been key Democratic supporters. For example, Chrysler’s secured creditors, who would have had priority in a normal bankruptcy proceeding, received 29 cents on the dollar, vs. Chrysler’s unions which received more than 40 cents on the dollar, even though they were the equivalent of low-priority creditors.
- Obama favored union workers not only over creditors, but also over non-union employees. For example, all United Auto Workers retirees at Delphi, GM’s Michigan-based auto supplier, received 100% of their pension and retirement benefits. But the 20,000+ non-union employees lost up to 70 % of their pensions, and all of their life and health insurance benefits. Numerous incriminating emails obtained by The Daily Caller proved that Obama’s Treasury Department “was the driving force behind terminating the pensions” (as well as healthcare and life insurance benefits) of the non-union workers. Those terminations, said The Daily Caller, “appea[r] to have been made solely because those retirees were not members of labor unions.” Moreover, the emails contradicted sworn testimony by the White House and Treasury Department, which had consistently maintained that the Pension Benefit Guaranty Corporation (PBGC)—the only government entity with the legal authority to initiate termination of a pension—had “independently made the decision to terminate the 20,000 non-union Delphi workers’ pension plan.”
- In August 2012, President Obama declared: “Now I want to do the same thing [i.e., bailouts] with manufacturing jobs, not just in the auto industry, but in every industry.” Radio host Mark Levin responded with a withering critique of the bailout that Obama and his administration were touting. Said Levin: “We are still stuck with 500 plus million shares of GM stock. And for us to break even, they have to be sold at $53 per share. They debuted post-bankruptcy at $33 per share. They are now $20 per share. That’s setting us up for another $16 billion in losses just in stock…. Obama allowed GM to illegally carry forth through bankruptcy $45.4 billion in losses, which will cost [us], the taxpayers, $18 billion in lost tax revenue. The $82 billion GM-Chrysler bailout was supposed to ‘create or save’ American jobs. It killed 100,000 jobs right out of the gate with the ideological closings of car dealerships…. [And] what about Obama’s boast today about saving a million jobs?… Before filing bankruptcy in 2009 … GM had 91,000 employees in the United States. Now, you can reach a 400,000 total by assuming that all of GM’s jobs, as well as all the jobs of its part suppliers and car dealers, would have been lost. So how did he save a million jobs? Or as he likes to put it: over a million jobs? Even saving 20% of the 400,000 jobs comes at a very high cost. $780,000 per job—Thank you, Mr. and Mrs. Taxpayer.”
Obama Gives an Indication That Taxes Will Ultimately Be Raised on most Americans, Not Just the Wealthy (though the latter will be targeted first)
- On December 6, 2012, Obama, calling for a tax hike on the top 2% of earners, said: “We’re going to have to strengthen our entitlement programs so that they’re there for future generations. Everybody is going to have to share in some sacrifice, but it starts with folks who are in the best position to sacrifice, who are in the best position to do a little bit more to step up.”
Obama Calls for Highest Sustained Taxation in U.S. History
On April 21, 2014, CNS News reported:
In the budget proposal he presented to Congress last month, President Barack Obama called for what would be the highest level of sustained taxation ever imposed on the American people, according to the analysis published last week by the Congressional Budget Office.
Under Obama’s proposal, taxes would rise from 17.6 percent of Gross Domestic Product in 2014 to 19.2 percent in 2024. During the ten years from 2015 to 2024, federal taxation would average 18.7 percent [of] GDP.
America has never been subjected to a ten-year stretch of taxation at that level.
In the twelve fiscal years preceding the Japanese attack on Pearl Harbor (1930 through 1941), federal taxation averaged 5.3 percent of GDP.
In the five fiscal years encompassing U.S. involvement in World War II (1942 through 1946), federal taxation averaged 16.1 percent of GDP.
In the fiscal years since World War II (1947 through 2013), federal taxation has averaged 17.1 percent of GDP.
In the period from fiscal 1992 through 2001, federal taxes averaged 18.3 percent of GDP. But in the last four years of that period (1998 through 2001), the federal budget was in balance.
In the twelve fiscal years from 2002 through 2013, federal taxes averaged 16.1 percent of GDP—the same that they averaged during World War II. However, the federal government ran deficits in each of those twelve years.
In all ten years from 2015 through 2024, under Obama’s proposal, federal taxes would be higher than 18.3 percent of GDP….
Under Obama’s budget proposal, according to the CBO, the budget will never balance. But over the next ten years, the federal government would add $7.183 trillion to its debt held by the public.
While adding that $7.183 trillion to the debt held by the public, Obama would increase taxes by $1.4 trillion, said the CBO report.
Obama’s 442 Proposed Tax Hikes
In April 2014 the Daily Caller reported the following with regard to a study by Americans for Tax Reform:
President Obama’s fiscal year 2015 budget proposal includes 93 new tax increases, which brings the total number of tax hikes Obama has proposed in office up to 442.
Obama’s rough budget proposal, titled “Opportunity for All,” proposed 93 new tax hikes, according to an analysis conducted by Americans for Tax Reform. A bill based on Obama’s spending blueprint recently died in the House by a 2-413 vote, while Paul Ryan’s budget plan, which repeals Obamacare and cuts more than $5 trillion in federal spending, passed the Republican-controlled chamber.
Obama’s 93 new tax hikes are actually more modest than the career-high 137 tax increases he originally proposed for fiscal year 2014, but still represent his second-highest number of tax hikes proposed during his years in office. Obama proposed a career-low 47 tax increases for fiscal year 2012 before his re-election campaign.
Americans for Tax Reform noted that its analysis did not include the 20 tax hikes signed into law as part of Obamacare.
Obama Proposes Tax on College Savings Accounts
In January 2015 the Obama administration announced its plan to end tax breaks for popular college savings accounts known as 529s, which allow college savings to grow tax-free. At the time of the announcement, approximately 12 million 529 accounts were active across the United States, with an average balance of $21,000 apiece and an aggregate value of $245 billion. The administration’s stated rationale for ending the tax breaks, which originally had been introduced in 2001 as part of a Bush-era tax-cut package, was that they unfairly benefit high-income people. But in fact the plans are used mostly by families with middle-class to upper-middle-class incomes. As Fox News explains, “Low-income families typically don’t have thousands of dollars saved up for college, while very wealthy families are more likely to have trust funds in place for their children’s education.” Under Obama’s proposed change, the money from the 529s would be taxed as regular income at the time it was withdrawn. But top Democrats, including House Minority Leader Nancy Pelosi, sensed that Obama’s plan was politically toxic and implored him to drop it. On January 27, 2015, the president complied with their request. Said an administration official: “Given it has become such a distraction, we’re not going to ask Congress to pass the 529 provision so that they can instead focus on delivering a larger package of education tax relief that has bipartisan support, as well as the President’s broader package of tax relief for childcare and working families.”
Obama Contemplates Executive Action for Tax Hike
On March 2, 2015, White House Press Secretary Josh Earnest said that President Obama was “very interested” in changing the tax code by means of executive action. While claiming that no announcement on this matter was imminent, Earnest said: “[T]he president certainly has not indicated any reticence about using his executive authority to try to advance an agenda that benefits middle-class Americans…. [T]he president has asked his team to examine the array of executive authorities that are available to him to try to make progress on his goals. So, I’m not in a position to talk about those in any detail, at this point, but the president’s very interested in this avenue, generally.”