Just The Facts: Republicans Falsely Claim Obama Seeks Biggest Tax Hike In History

After President Obama unveiled his jobs and deficit reduction plans, he took to the road to draw a contrast between himself and the Republican politicians who want to end his political career. Obama’s proposes to spend money now on hiring people and cutting taxes temporarily to spur further job growth, and pay for it in just over a year, in large part by raising taxes on wealthy Americans.

The Republican vision — phasing out safety net programs like Medicare in order to maintain low tax rates on the same group of affluent people — is far less popular. So in their own tried and true way, Republicans recast Obama’s plan for “shared sacrifice” as “the largest tax increase in history.”

What a difference! But also untrue.Using historical data from the Treasury Department on the impact of past tax laws, and from the Office of Management and Budget’s analysis of Obama’s current proposals, the Center on Budget and Policy Priorities ran the numbers for TPM and found the claim to be false by just about any measure.

Assessing new revenue as percentage of GDP, it turns out Obama’s tax proposals would rank below a law signed by President Ronald Reagan on the list of significant tax increases of the last five decades.

Making a direct comparison is difficult. Treasury calculates the impact of past tax laws relative to what’s known as the “current law baseline” — in essence, analysts look at revenues after the law passed, and subtract what would have happened if it hadn’t been enacted at all.

Under today’s “current law baseline,” the Bush tax cuts of 2001 and 2003, and other tax cuts Obama signed in 2010 to stimulate the economy, will soon expire. That means the “current law baseline” assumes a huge glut of revenue starting in 2013. Obama’s plan would actually make many of those tax cuts permanent. It would also allow the cuts that benefit wealthy Americans to expire, and impose a series of new taxes on high-income earners. Taken together, though, it would yield significantly less revenue than if Congress and Obama simply did nothing, and amount to one of the biggest tax cuts in history — $2.29 trillion over the next ten years. As a percentage of GDP, the third largest since 1968, ahead of both the 2001 and 2003 Bush tax cuts and behind Reagan’s Economic Recovery Tax Act of 1981, and last December’s tax deal.

That’s the apples to apples comparison, but it rests on a historical quirk — current tax law is teeming with tax rates and policies that are set to expire.

When Republicans call Obama’s plan the biggest tax increase in history, they’re using a “current policy baseline.” In other words, they assume today’s tax rates are fixed, and complain that Obama’s plan would raise revenue thereupon by quite a bit — $1.57 trillion over 10 years. By this measure, as a percentage of GDP, Obama’s “tax hike” is smaller than Reagan’s 1982 Tax Equity and Fiscal Responsibility Act and the Revenue and Expenditure Control Act of 1968 but larger than Clinton’s 1993 tax increases and George H.W. Bush’s 1990 bill, as well as Reagan’s 1984 Deficit Reduction Act.

To claim Obama’s plan represents the largest increase ever (or at least the largest in recent history) one has to look at all past tax increases in inflation adjusted terms. But this is a false measure that ignores the growth of the economy — we are way richer as a country now than we were then.

None of which is to say that Obama’s proposing trivial tax increases. But biggest ever? Please.

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