March 6, 2012--Tax Pledge

Grover Norquist is president of Americans for Tax Reform and is so influential that some have called him our 101st senator. As evidence of that power he has gotten almost every Republican member of Congress to sign a no-new-taxes pledge.

In his new book, Debacle: Obama's war On Jobs, he claims that Obama has already raised hundreds of billions in taxes and if reelected will raise them by trillions (yes, trillions) more.

His current favorite GOP candidate for president, Mitt Romney, claims that Obama has implemented 19 new taxes. Both Norquist and Romney fail to note that Obama supported and signed legislation to cut hundreds of billions in payroll taxes, agreed to extend the Bush era tax cuts for at least two more years, and included hundreds of billions of dollars of tax cuts in his stimulus plan.

Indeed, if reelected, Obama wants to extend the Bush tax cuts but only for individuals making less than $250,00 per year though he would cut taxes further for middle-income people. But in regard to the claim that he has already raised taxes 19 times, here are the facts from PolitiFacts.com about all nineteen:

Items that are clearly taxes, and that are already in effect

• Increasing the federal excise tax on tobacco. Obama signed legislation raising taxes on cigarettes and other tobacco products soon after taking office; that money goes to pay for children's health insurance programs. The law went into effect in 2009.

• A 10 percent excise tax on indoor tanning services. This tax is narrowly targeted at tanning bed users, but it is still a tax. This took effect July 1, 2010.

• Increasing corporate taxes by making it more difficult for businesses to engage in activities that reduce their tax liability. This appears to refer to the closing of a half-dozen existing exemptions and credits relevant only to large international corporations. (We wrote about this recently.) While this is a provision targeted narrowly at big conglomerates -- and while it’s popular as a way to keep deep-pocketed countries from sheltering excessive amounts of income -- our experts said it does count as a tax increase. Obama signed the bill into law on Aug. 10, 2010.

• Imposing an annual fee on manufacturers and importers of branded drugs, based on each company’s share of the total market. While some industry-specific levies are intended to help foot the bill for regulatory processes, this one is more of a revenue raiser for the more general goals of the health care overhaul. It took effect on Jan. 1, 2011.

Items that are clearly taxes, but which are not yet in effect

Listed in chronological order of date they will take effect:

• Increasing the hospital insurance portion of the payroll tax from 2.9 percent to 3.8 percent for couples earning more than $250,000 a year, or $200,000 for single filers. Takes effect Jan. 1, 2013.

• Applying the 3.8 percent hospital insurance tax to investment income for couples earning more than $250,000 a year, or $200,000 for single filers, for the first time. Takes effect Jan. 1, 2013.

• A 2.3 percent excise tax on manufacturers and importers of certain medical devices. This is a narrowly targeted tax, but still a tax (and will likely be reflected in consumer prices once it begins). Takes effect Jan. 1, 2013.

• Raise the 7.5 percent adjusted gross income floor for the medical expenses deduction to 10 percent. People who would have qualified for the deduction this year would pay more. Takes effect Jan. 1, 2013.

• Annual fee levied on health insurance providers, based on each company’s share of the total market. Same logic as the levy on branded drug companies cited above. Takes effect Jan. 1, 2013.

• Limiting the amount taxpayers can deposit in flexible spending accounts to $2,500 a year. While the Obama camp says this provision is intended in part to stop abuse of the system, our experts consider it a tax because it increases taxable income. Takes effect Jan. 1, 2013

• Eliminating the corporate deduction for prescription expenses for retirees. According to the Society for Human Resource Management, certain employers were not only "qualified to receive a subsidy equal to 28 percent of covered prescription drug costs for their retirees," but the employer also was entitled to an income tax deduction for the subsidy. The idea behind providing both a subsidy and a tax deduction was to reduce taxpayer costs for the Medicare drug plan by encouraging companies pay their retirees’ costs, but the way it was structured was criticized by some as double-dipping. No matter the justification, our experts agreed it was still a tax hike. It takes effect Jan. 1, 2013.

• Increasing taxes on health insurance companies by limiting the amount of compensation paid to certain employees that they can deduct from their taxes. According to Congress’ Joint Committee on Taxation, this will be effective for compensation paid in taxable years "beginning after 2012, with respect to services performed after 2009." Once again, this is narrowly targeted at health care company executives -- not a popular group -- but it’s still a tax.

• A 40 percent excise tax on employer-provided "Cadillac" health insurance plans costing more than $10,200 for individuals and $27,500 for families. Takes effect Jan. 1, 2018.

Items about which there is no consensus over whether they’re taxes

• Reduce the number of medical products taxpayers can purchase using funds they put aside in health savings accounts and flexible spending accounts. The definition of which items qualify and don’t qualify for flex spending plans seems to us to be more like the kind of decision made by regulators than lawmakers responsible for writing the tax code.

• A mandate for individuals to buy health insurance and for employers to offer it to their workers. This one is a doozy, because the answer is crucial to the court case that challenges the entire health care law. Because the courts will ultimately decide whether the federal government is levying a tax on people who can afford health insurance but choose not to buy it -- or whether the government is simply using the tax code to enforce a criminal penalty, as some critics of the health care law say -- we won’t take a side on this question.

Items where there is a strong argument that they are not taxes

• Exclusion of unprocessed fuels from the existing cellulosic biofuel producer credit. This provision -- which is already in effect -- was included in the health care bill even though it has nothing to do with health care. Though its inclusion as an unrelated item suggests that revenue-raising is the primary intention, it was actually intended to fix a legislative oversight.

According to the House Rules Committee, then controlled by the Democrats, Congress in 2008 "enacted a $1.01 per gallon tax credit for the production of biofuel from cellulosic feedstocks in order to encourage development of new production capacity for biofuels not derived from food source materials. Congress is aware that some taxpayers are seeking to claim the cellulosic biofuel tax credit for unprocessed fuels. … The provision (in the health care bill) would limit eligibility for the tax credit to processed fuels."

Beyond the question of whether it simply corrects an error, it can be argued that this provision is not a tax since "there’s no logic requiring that unprocessed fuels qualify for tax credit. If this is a tax increase, then one should, presumably, treat as a tax the fact that fountain pens are not eligible for a tax credit, as they could have been, but weren’t included in this tax credit." (The change has already taken effect.)

• The health care law’s "medical loss ratio" provision. Insurance companies will be required to spend either 80 percent (in the individual- and small-group market) or 85 percent (in the large-group market) of the money they receive from premiums on medical care and health care quality improvement, rather than on administrative costs. The provision took effect in 2011. The intention behind this provision is to shape how insurers spend premium dollars, making it more quality regulation than a revenue-raising tax.

• A $50,000 penalty per non-profit hospital if they fail to meet new "community needs assessment." This falls into the same category as the previous item -- a provision intended to regulate insurers’ practices rather than generate revenue.

• Increased penalty for purchasing disallowed products with health savings account, to 20 percent. This is a penalty for a violation, not a tax.

It’s worth pointing out that a number of these provisions are quite narrowly targeted, and some are likely popular among the public, such as those aimed at health-care executive compensation and tax-shelter strategies by billion-dollar multinational corporations. By contrast, as we have noted, the most expansive of Obama’s tax policies went the other direction, reducing taxes for 95 percent of working families.

And a final note: The president doesn’t have the authority to raise taxes on his own. He can only do so with the consent of Congress, which is what happened in each of these cases.

Our ruling

Of the 19 provisions Romney is citing, we conclude that 13 may be reasonably defined as taxes (though of those, only four are already in effect). Of the remaining six provisions Romney cites, we find two that are subject to disagreement and four that are probably not taxes at all. So, more than two-thirds of the 19 provisions Romney cited are pretty clearly taxes, but many of them are narrowly targeted at groups from tanning-bed users to health company CEOs.

On balance, we rate the statement Half True.

In addition to the Politifact analysis, the Norquist-Romney claim that Obama has cut $500 billion from Medicare is a distortion of the truth--"Obamacare" cuts that amount over ten years from the projected increases in the federal cost of Medicare. The cuts are really savings and will be the result of reducing abuse, inefficiencies, and abuse--not from cutting benefits as the Republicans have been charging. In fact, the Obama plan increases Medicare benefits such as closing the donut hole for prescription drugs--a significant cash savings for seniors.

So much for the facts. Though PolitiFacts did not assign dollar amounts to Obama's new taxes, in total, even including those that are not taxes, the bottom line is less than $100 billion in new "taxes."