During a Friday, April 5 White House press briefing, spokesman Jay Carney replied “I’m not disputing that” when asked if a particular Obama budget proposal would raise income taxes on the middle class. The proposal in question is referred to as “Chained CPI.”
The term is a Washington euphemism for measuring inflation at a different, slower pace. Many tax and budget items are indexed to inflation, so slowing inflation’s measured rate of growth has both spending cut and tax increase implications. On the tax side, all income tax brackets are subject to inflation. Slowing down the inflation rate slows down the annual rate of growth in all income tax brackets.
This means the Obama budget contains a tax increase on 100 percent of middle class taxpayers (anyone who pays the federal income tax).
Many other tax provisions—the standard deduction, the personal exemption, PEP and Pease, IRA and 401(k) contribution limits, and many others—are also tied to how CPI is measured. Chained CPI as a stand-alone measure (that is, not paired with tax relief of equal or greater size) is a tax increase and a Taxpayer Protection Pledge violation. Various reports peg the tax increase amount as exceeding $100 billion over the next decade.
The transcript from the exchange is as follows:
MAJOR GARRETT, CBS NEWS/NATIONAL JOURNAL: “A follow-up on Jim’s question — you do not and the White House does not dispute that if the chained CPI were put in — to be put into effect, it would raise taxes on middle-income Americans?”
JAY CARNEY: The chained CPI, which is a technical adjustment to how we measure the consumer price index —
GARRETT: But its practical effect would be —
CARNEY: Again —
GARRETT: — to raise taxes on —
MR. CARNEY: I’m not disputing that, but I’m saying that it is not the President’s ideal policy. It is in a letter from the Senate Minority Leader requesting that it be part of a negotiation deal.
GARRETT: All right, I’m just saying you don’t disagree, that those things happen?
CARNEY: Right, but Major, and —
GARRETT: — a tax increase?
CARNEY: — let’s be clear, as we’ve said all along, that the offer was on the table. The President made that offer because he was hopeful that we would see commensurate willingness to compromise from Republicans. Unfortunately, we haven’t seen that.
The President is engaged in conversations with Republicans in the Senate in particular but also in the House in an effort to find common ground, to see if there is a willingness to embrace the idea that we can reduce our deficits in a balanced way and continue to invest in our economy and middle-class families. And if there is, then we’ll be able to get something done.
GARRETT: And to critics who would say to this President, looking at this proposal, this is the last and possibly worst time — from their point of view — to raise taxes on the middle class, inflict benefit cuts on elderly on fixed incomes, even in the pursuit of deficit reduction, the President would say what?
CARNEY: The President would say that as part of a balanced approach that asks the wealthy and well-to-do and well-connected to contribute their fair share through tax reform, elimination of special tax breaks that average folks don’t get, that we can also include entitlement reforms that allow us to achieve deficit reduction in a balanced way and allow us to continue to invest in our economy in ways that will help it grow and create jobs.