There is a serious waste of resources happening today in the media and fanned by McCain's campaign. I wish the same amount of time and energy was being spent discussing things like, oh I don't know, let's say taxes! The tax "plans" of Obama and McCain take 2 very different approaches. Here is an interesting discussion Obama had with Bill O'Reilly about Obama's view of taxes and their use, you can read the transcript or there is a video link:
http://www.foxnews.com/story/0,2933,419703,00.html
I think a few facts are important:
Obama would restore the top two income tax rates to their pre-2001 levels of 36% and 39.6%. Currently they're 33% and 35%.
Obama would start applying payroll taxes to income over $250,000. Currently they pay Zero payroll taxes on income over $250,000.
Obama would tax long-term capital gains and dividends at 20%. Currently the most one would pay is 15%.
The Congressional Budget Office said today the U.S. budget deficit for fiscal 2008 is $407 billion and predicted it is likely to rise further in fiscal 2009.
The U.S. national debt is $9.6 trillion.
Now some opinions:
I don't think it is realistic not to raise taxes in some way. Even if we magically cut $407 billion from next year's budget, we'd still be looking at growing the $9.6 trillion in debt because of interest. And don't think it's Iraq. Obama says we're spending $10 billion a month in Iraq. We can assume he's using the highest possible figure. So saving every single cent of that saves only $120 billion. 300 billion to go in the budget...
I am for cutting spending, of course. Let's cut billions and billions in spending. I have no idea where, but let's slash it! But the reality is that the demands of infrastructure, commerce, energy and security are rising. I see no one else being honest, or at least specific, about how to pay for these things!
If we assume taxes must increase, what's wrong with Obama's plan?
Okay, I'll throw it out there and hope you can help me. Give me your opinions and stats on what's right or wrong on Obama's proposed tax initiatives.
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Right or wrong, I don't know. However, there is a great summary at the following link from the Tax Policy Center, a non-partisan organization.
http://www.taxpolicycenter.org/UploadedPDF/411750_updated_candidates_summary.pdf
There are several interesting aspects of the policies. One, is that both plans will apparently drastically increase the national debt. Second is the difference in benefits across the income levels. Finally, is the number of tax credits that will be given by Obama. I didn't count but the list appeared at least twice as long. Just interesting.
that link doesn't work. just go to www.taxpolicycenter.org and look around. There is a wealth of information.
One aspect of Obama's plan that I don't like is the increase of taxes on capital gains. Although that will lead to a bunch more work for me (1031 exchanges and what not), I don't like the idea of increasing the capital gains taxes. I'm going to use the word investment here as a gross simplification of what capital gains are, but it makes this so much easier. I want the public to invest in projects, income creation, and general investment opportunities. By taxing that investment we are reducing the attractiveness of those investments. Now it is true that you don't have to pay the tax until you take out the money, but that rational creates "lock in" whereby people do not extricate their money from bad investments or move their money to where it would be more useful, thereby creating lost opportunities and deadweight loss. Both of which are unacceptable from an economic view point.
If you have the time and energy to read an excellent law review article on an alternative to income taxes that rewards savings read 52 Tax L. Rev. 17. The article is by Noel Cunningham, professor at NYU (who incidentally taught my week long course) it has some very interesting assumptions and examples of an alternative tax system; a consumption tax.
Yeah I don't like penalizing people for investing. Seems kind of crazy. It seems like he is trying to make it as hard as possible for people to save up a retirement.
Did you notice the big difference in their estate tax plans? The way I see it and I could be wrong, McCain wants to exempt the first 5 mil and tax the rest at 15 percent. Obama wants to make the first 3.5 mil exempt and tax the rest at 45%!!! That seems super high to take half of what someone has made and wants to give to their family. I could be seeing this all wrong and appreciate all thoughts.
You are correct. The crazy thing is that in 2010 if you die everything is exempt. However, if you die in 2011, the exemption amount is only $1million and everything over that is taxed at 55% That is crazy. I disagree with the estate tax. It is a mechanism whereby we prevent the pooling of wealth in certain families (in an attempt to avoid English like royalty or serfdom), but it is still a penalty for working hard and accumulating wealth. Plus it is a double taxation because you have already paid taxes on that money once at the income rate (probably 35%) so you end up actually paying 80% in taxes on those monies passed to the next generation. That seems onerous.
So how hard or easy is it to slowly transfer stuff to your family as you age to prevent the man from sticking it to you?
The problem is that you also have to worry about the gift taxes, which the exclusion limit this year for gift taxes is 12,000 per donee from each donor. Thus in a typical family of H and W and C1 and C2, H could give 12,000 to C1 and 12,000 to C2 and not pay the gift tax. W could do the same thing. Thus, H and W effectively transfered 48,000 of income tax free to the next generation. This is all well and good unless you are talking about transferring the amounts necessary to avoid paying the estate tax, which is considerable. At this rate it would take a person with 4.8 Million in assets 100 years to transfer enough wealth.
You don't even want to know what happens if you make a large transfer to grandchildren. You are subject to the generation skipping tax which is a double tax. For ease, you take $1 M and leave it to a grandchild. You have to pay 45% on the skip; and then 45% on the next transfer. This effectively reduces your gift to approximately 30% of its original value. Your $1M just turned into $300k. Bad deal.
***the above is for general discussion purposes only and is not intended as legal advice; you should contact a tax professional to discuss these matters.***
"Seems like he is trying to make it hard as possible for people to save up a retirement"
Imagine the staff meeting, Barack at the head of the table, "Today, people, I would like to come up with a plan to make it as hard as possible for people to save for retirement..." Political jib jab.
The reality is that Obama's tax plan will offer the people who read this blog more income tax relief than McCain's.
"The best-kept secret in this presidential campaign is Barack Obama's substantial package of middle class tax cuts--most political junkies can't even tell you what's in it and most working-class swing voters don't even know it exists.
Indeed, those voters would be shocked to discover that, according to independent analyses, Obama is offering 80% of Americans four times as much in tax relief as McCain on average."
http://www.forbes.com/opinions/2008/09/10/obama-mccain-taxes-oped-cx_dg_0910gerstein.html
I think the numbers you cite DVD are supported by the Tax Policy Center's analysis. The question though is:
Which is better more money in my pocket or more money available to those people/entities that can use the money for investment and job creation?
There are several inherent assumptions in that question; the most notable is that the corporations will use any tax savings they receive to invest and create jobs and not simply boost profits and CEO pay. There are several other assumptions that are too detailed to discuss here.
It is obviously better for me to have more money in my pocket, but is it possible that I could be better off by foregoing a benefit in favor of something else? This is related to "prisoner dilemma" made famous by Nash (economist from the movie A Beautiful Mind).
One could argue that putting more money in the masses' hands will increase demand for products, thereby increasing sales, thereby increasing profits, and thereby increasing investment and jobs to handle the new demand.
It really is a clash between Trickle Down and Trickle Up economics.
Have you ever been put on hold calling somewhere important (like getting a ticket to Sarah Palin's Rally)? After a while, you reach a point of no return. In Psychology, they call it "Equity rescuing". I have invested too long to see money tricle down from the rich. If I vote for Obama, it will look like hanging up the phone and dialing back again (I have to start all over again) . I trust the promise of Republicans that with more tax cut for the big business,my economical situation will get better. You might ask "what has Exxon done with their profit?". Tha is a good question and I have an answer for that. They are so caring that they are looking for the best solution to tricle down some money our way (lower the gas price to $3.39. That is, by the way, savings of $50 each year for me. That can pay my dues to NRA). I don't understand why Democrats (Obama in particular) want to jepordize this. If they wait, I am pretty sure they will see the tricle. But they don't have the patience. That's okay. Me and my fellow hopeful friends will wait. And guess what? when it tricles on us, you can't have any!
No less than Alan Greenspan is saying we can't afford McCain's tax cuts without spending cuts. Sounds like a trickle down (alone) is not going to cut it in this economic cycle:
In an interview with Bloomberg Television Friday, Greenspan said the nation could not afford 3.3 trillion dollars of tax cuts proposed by McCain without matching cuts in spending.
Greenspan, a long-time friend of McCain and a Republican, said about the Arizona senator's plans to extend massive tax cuts imposed by President George W. Bush: "I'm not in favor of financing tax cuts with borrowed money."
McCain has said he would pay for his cuts by ending pet funding projects for US lawmakers' districts known as "earmarks."
You say: “Currently they pay Zero payroll taxes on income over $250,000.” Huh? This is over my head. What is the difference between “income tax” and “payroll tax” that you refer to here?
I heard the part of the interview between O’Reilly and Obama. You make the point that Obama is being honest about how to pay for rising costs. But his plan, as he described in with O’Reilly, won’t do that. He plans to tax the rich and redistribute it to the middle class. First, this does nothing to offset governmental expenses or debts. It is just robbing Peter to pay Paul. Now I liked Kevin Costner as Robin Hood, but this is not Sherwood Forest. I am not for this kind of socialism. I like individual freedom instead. Sorry, this particular tax increase would not do what you are suggesting: cover rising costs.
Second, Obama kept saying that the rich should pay more because “they can afford it.” Mmmmm. This is a presumption on his part here. What I keep thinking about is that all these rich people have others that depend on them, or are influenced financially by them in some way. If you limit the income to the rich folks, you will limit their ability, or willingness, to support the others that their finances influence. It reminds me of the phrase “a rising tide lifts all ships.” In the same way, if a tide is lowered, all ships dip as well. This will end up hitting the pocket books of the middle class. So, I guess it’s a good thing Obama wants to give the tax increases to the middle class: they will need it.
Third, Obama included himself in the group that “can afford it”. And I think that is great. As a free individual with excess resources, he could certainly choose to give an additional amount of his own money to offset government spending and debt. There is a place on his tax return form for him to do just that. It is not where I would choose to spend my money. I’d rather give it to other causes. But I bet a look at his tax returns would not reflect such a choice. I guess it’s possible to verify that since politicians’ tax returns are published somewhere. Actually, he would probably think it ridiculous to do that. I know his accountant would. But since he is obviously so passionate about funding government, I present that it is more ridiculous that he doesn’t do it.
Fourth, please don’t say Obama sounds like Jesus. Please, please, please. It makes my stomach turn. Jesus was not an economist. You don’t know what he would say about this! Yuck! I guess I’m just skeptical about politicians. I see every word out of their mouths as manipulative propaganda. I think I’m even more suspicious if it appeals to lots of people. He, like all politicians, will say what he needs to say to gain support, or diminish damage, whichever the case may be. I just don’t think you can take a look at their viability as a choice solely based on words spoken during the campaign. A wholistic look is much more helpful.
I have to admit that my reaction to this may be fueled by a recent stomach-turning I encountered at Obama’s choice to use the same claim about agreeing with Jesus in an interview he had on CNN. He was asked about supporting gay marriage. He never declared if he was for gay marriage or not. He just referred to being bothered by examples of folks not being able to visit their significant others in the hospital. He said that he was sure Jesus wouldn’t like that either. Yuck! He just borrowed the authority of Jesus to support gay marriage and homosexuality, albeit indirectly. I’ve been irritated ever since. I apologize if I have transferred my disgust for that to your comments.
I have remained emotionally neutral about the candidates until recently, content merely to go with the Republican candidate because my general political views align more closely with the Republican philosophy of limited government and individual freedom. I didn’t have anything against Obama other than he happened to be Democrat. But the other day I was shown several videos on YouTube about his refusal to support a bill, while in the Illinois state Senate, that would ban babies being killed (or neglected until dead) by hospitals that performed late term abortions in which the baby was mistakenly born alive. I can’t quite get my head around anyone opposing legislation such as this. Those babies should be protected. Even the abortion lobbies didn’t oppose it. In trying to learn more about the facts presented in the video, I looked around to see what else was out there about it. I ended up watching several interviews of Obama on the abortion issue. Abortion is my hot button, I suppose. I get mad when I hear people trying to justify it in any form. I listened to too many interviews of Obama on abortion. The gay marriage quote came in the middle of one of those. It was the cap on my ability to stomach any more of him.
There is more, but I’ll stop. I apologize if this sounds overly argumentative. It is not my intention to set myself in opposition to my good friend DVD, who is much smarter than me.
Carrie
Thanks for the thought and comment! Much there that I'll be happy to address as soon as I can. But one quick note - - no one said anything about Jesus in this entire tax discussion.
You're right. I read the blog on the dicussion on "Evil" and the one on taxes at the same time, so I got them mixed up. Sorry about that.
No problem, I figured that, just wanted to clear that up for anyone reading (though it may just be you and I by this far down the page). I want to give better attention to your thoughts here, but I thought I could make a stab at an easier one here: income redistribution. "He plans to tax the rich and redistribute it to the middle class." This is a common belief and repeated phrase, and simply false. I know immediately you must think I can't possibly be right because if it was so clearly false why would people keep saying it? Why people keep saying it sounds like something you and I can mostly agree on - they say it because it gets them votes.
Okay, redistribution means I take from one and give to another. You understand this because you said plans to tax the rich and give it to the middle class. That means Richie Rich has 12 apples and I take 2 apples and giving those 2 apples to Mary Middle, who only had 5 but now has 7. That's redistribution.
Taxes are saying I'm going to take apples from both of you. Obama's plan continues to take apples from both but would take more apples from Richie than from Mary. But he's NOT GIVING Richie's apples to Mary.
Unless my memory is falty, which I admit, it may be. I got that phrase about redistribution from him directly on his inteview with O'Reilly. They talked about it for some time. I don't think I mis-heard that. It is his own description of the plan from that interview that I'm discussing and not a "talking point" bantered around. But I'll go check that section out again and see if I misunderstood.
Two quick thoughts/questions:
Isn't what we are experiencing now the effects of "trickle down" economics. Give free reign to the top 1% and hope that they share from their table.
And the latest bail out just shot both their economic plans to hell.
Let's see their adapted plans.
Payroll taxes in this context are the Social Security and Medicare taxes. In normal income situations, a taxpayer pays a flat percentage on all income up to $102,000 for Social Security and nothing beyond that (there is no cap for Medicare payroll taxes). Obama is proposing to start the Social Security tax back up again on income over $250,000.
I don't think in that short clip that Obama explained how every dollar would be paid for but his complete plan does. McCain does not. Even Greenspan was out a week or so ago saying the economy cannot afford McCain's 3.3 trillion in tax cuts without spending cuts - and there ain't 3.3 trillion in "pork barrell" spending!
And the events of this past week have really made this even more important. The budget for 2008 was already $407 billion off - 400 billion! In the last week we've committed to billions more, and they're asking for $700 billion more! This seems completely out of control.
If you don't want taxes on income over $250,000 raised, fine, that's fair. Now come up with $407 billion for this year plus some extra to start paying down the debt plus the extra $700 billion for this latest "bailout." Good luck!
P.S. these tax increases Obama is proposing are taking some rates back to those under Reagan and Clinton - none over those rates. Just keep that in mind. Seems like the economy did okay under those rates.
I think my response to this is that our current financial crisis including: the high gas prices, bottom falling out of the mortgage industry, and bail out monies are all at the fault of too much government interference. Tax increases may be necessary with our current rate of government expenditures. But there is also another solution: reducing government expenditures. This is the main reason I am a republican. I’d like to see the least government possible.
My impression of Obama is that I would get exactly the opposite of that if he took the White House. However, we do not have a one-man government. We have a balance of power. So in my opinion, the Congressional races will have a bigger impact on our country than the Presidential one. I’m not at all happy with the work of the Congress these days. Our only “hope”, if there is any to be had from the government, is in our Congress getting their act together and doing the hard work we elected them to do and stop the partisan fighting.
"reducing government expenditures. This is the main reason I am a republican."
Sorry, Carrie, you need a new party! It won't be Democrat, but you better start shopping. Since taking office, Bush has increased the federal budget by 1.1 trillion dollars. That's just the INCREASE. And this happened with over 6 out of 8 years of Republican control of the Congress and the White House. Oh yeah, the Republicans created an entire new federal agency too (Homeland Security) while reducing NONE of the others.
I'm not addressing here whether these expenditures are appropriate or not, I'm just pointing out the Republicans are NOT the party of smaller government.
"Republicans are NOT the party of smaller government."
Perhaps they are not the party of "small" government; but I believe they are the party smallER government.
A new party would not be unwelcome. I actually like to think of myself as "conservative" rather than "republican" since that party has been less than conservative at times.
But ahhh, it is what it is. And between the two choices, republicans are still closer than democrats.
Frankly, I'm kind of sick of all of it and I can't wait for the election to be over.
you shouldn't give up so easily, carrie. there are several different parties out there. the 2 party system is not in the constitution anywhere. we are not stuck w/ this. there are many nations who operate rather well w/ multiple parties. perhaps you would be more comfortable casting your vote for what you actually believed, rather than the "lesser of 2 evils."
http://www.electioncountdown.us/parties.htm
it is better to vote for someone you believe in and lose, than to vote for someone you don't believe in and win. he will betray you.
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