Short version: Obama promise to balance budget in 2022 means increasing taxes by $1 trillion in 2013 because... MATH
In an apparent response to the Brookings analysis which claims that Romney would need to increase taxes on middle class taxpayers to make his rate reductions revenue neutral, former McCain adviser and CBO chief Douglas Holtz-Eakin of the American Action Forum has published a study which claims that Obama would also have to raise middle class taxes to meet his deficit reduction plans. The Weekly Standard reports T]axpayers making as little as $30,000 will carry $1,500 more in taxes annually over the next 10 years."
The primary difference between the two studies is that Holtz-Eakin is a complete idiot.
Holtz-Eakin takes as his starting point Obama's "commitment" to achieve "primary budget balance" by 2022. He purports to show that tax rates on millionaires would have to increase to 123% to close the budget deficit without increasing taxes on any other income groups. Since that is not possible he claims Obama will have to tax everyone, even taxpayers earning as little as $30,000.
In fact, using Holtz-Eakin's numbers, the budget can be balanced in 2022 solely by increasing taxes by just 11% on millionaires or if tax increases are extended to all taxpayers making more than $200,000 by increasing their average tax rate by just 4%.
So how does HE fuck up a simple calculation by a factor of 10? Details of Republican "Math" under the orange blurble.
In fact to get his result Holtz-Eakin assumes that Obama will raise taxes by enough to reach budget balance in 2013. The budget assumptions are in the table below.
Obama's OMB defines "primary budget balance" as Revenues equal to Program spending (ie ignoring interest on the debt). Holtz-Eakin grumbles but agrees to use this definition cause well he is trying to pin something on Obama that he doesn't mean so he needs something to take out of context. He will just slip the interest in later without mentioning it.
FiscalAs we see the projected deficit using the current tax code with AMT indexed to inflation (Holtz-Eakin's baseline) is $420 billion in 2022. That is the deficit we need to close to meet Obama's target. For some reason he converts from fiscal year numbers to calendar year numbers by averaging in some of the following calendar year values, but the effect is insignificant increasing the deficit from $420 to $426 billion. The "base case" assumes that only tax increases are used to eliminate the deficit. The "balanced approach" assumes" equal tax increases and spending cuts so taxes need only increase by $213 billion.
Years 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Spending 3,555 3,574 3,670 3,846 3,967 4,097 4,312 4,514 4,739 4,970
Revenue 2,660 2,873 3,147 3,378 3,583 3,760 3,943 4,139 4,341 4,550
Deficit 895 701 523 468 384 337 369 375 398 420
Base Case 847 657 509 447 372 345 371 381 403 426
Approach" 423 328 255 224 186 172 185 190 202 213
In 85 98 102 112 112 121 148 171 202 213
For some reason Holtz-Eakin doesn't bother with income numbers for 2022, he makes do with 2013 numbers (we'll come back to this) but we can make some rough calculations. In 2013 those making more than one million dollars represent 374,000 returns with total income of $1.156 trillion. CBO revenue projections increase 71% from 2013 to 2022 so we can assume the base income also increases by 71% to $1.977 trillion. Under the balanced deficit reduction assumption (the one Obama seems to advocate) the total percentage increase is just $213 billion divided by $1977 billion or 10.8% increasing their total tax burden to 41.5%
If tax increases extend to those making $200,000 the percent increase is just 213/5429 or 3.9%.
So where does that 123% number come from?
It ain't in the paper, but we can figure it out. From Holtz-Eakin's table we can figure out that he is using 2013 income as the base for his calculation, and that the tax increase he envisions is $1077 billion for the base case and half that - $538 billion for the "balanced" case.
That threw me a bit cause $1077 doesn't appear anywhere in the tables or the study. To get it Holtz-Eakin uses the full deficit (including interest on the debt which adds $230 billion to the 2013 deficit of $847 in the table). Really that is it. Holtz-Eakin (and Romney who is using this BS) claim that when Obama promises to balance the budget in 10 years not including interest he really means to balance it next year and cover the interest costs. So he has to increase taxes next year by a trillion dollars, never mind that Obama is arguing for larger deficits in the short term to spur economic growth.
We rate this 1 TRILLION Pinocchios and 111% false.