Obama’s Tax Plans

Here’s a pretty good article breaking out all of Obama’s proposed tax increases.  Let’s look at some of them.

To start, Obama frequently cites $250,000 as the line between those who would be subject to higher taxes and those who wouldn’t.

Indeed, under Obama’s tax plan, married couples with at least $250,000 in gross income are likely to see their taxes go up if Obama is elected president.

But what about single filers? The line for them would likely be about $200,000, according to an Obama adviser.

Those groups could end up paying anywhere from several thousand dollars to tens of thousands of dollars more to Uncle Sam than they do now, according to estimates from the Tax Policy Center.

Guess that $250,000 figure isn’t as solid as we thought.

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’s proposal would also reinstate some limitations on how much of a given deduction or personal exemption high-income taxpayers may take.

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The Obama rate increase would certainly narrow the spread between the two [the AMT and the regular tax system] - since the amount owed under the regular code would go up. The question is would the amount you owe because of the increase exceed your AMT bill.

This is Obama’s brilliant plan to save people from the AMT.  He’ll jack up our taxes so that we’d pay more than the AMT would require anyway. 

Philosophically, I have a big problem with using a different tax code for people of different incomes.  We’re all Americans and should be subject to the same laws. 

But I’m curious how Obama squares this proposal with the one above.  The 33% tax bracket for a single person starts at $164,550.  For a married couple it starts at $200,300.  Those figures are below the thresholds of $200,000 and $250,000, respectively, below which Obama promised not to raise taxes.  He doesn’t say anything about moving the brackets up, so I am forced to conclude that Obama’s promise is empty. 

In addition to wages up to $102,000 - the current cap on salary subject to the payroll tax, which funds Social Security - Obama would also tax amounts over $250,000.

In other words, income between $102,000 and $250,000 would be protected.

The reason for creating this doughnut hole in payroll taxes is simple.  Obama is pandering to the people in the doughnut.  But it completely undermines the stated purpose for Social Security - a supplementary retirement program - and changes it into an income redistribution program.  This is unlikely to make it through Congress - even a Democrat one. 

Long-term capital gains used to be taxed differently than dividends, which were subject to one’s top income tax rate. Under the 2001 and 2003 tax cuts, gains and dividends are treated equally. Currently the most one would pay is 15%.

Both rates are scheduled to rise by 2011 - long-term gains to 20% and dividends would once again be taxed a taxpayer’s top income tax rate for dividends.

Obama would continue to treat gains and dividends equally and would keep the current rate in place for everyone except high-income households.

He hasn’t specified how high he’d like to make the rate, but observers expect and Obama himself has virtually said that the new rate likely would fall between 20% and 25%.

Notice that Obama does not define a “high-income household?”  Right now about 50% of Americans are investors.  How many can expect a tax increase?

When it comes to family wealth, for instance, Obama favors maintaining the estate tax, which is scheduled to be repealed in 2010 for one year. But he would limit its reach.

Obama would freeze the estate tax exemption amount at $3.5 million - up from its current $2 million level and the $1 million level it’s set to revert to in 2011. He would also keep the current top rate of 45%, which is below the 55% it is set to revert to in 2011.

This tax is one of the ones that frustrates me the most.  A person spends his or her entire life building wealth and paying taxes on that income, but if he or she accumulates too much wealth the government will sweep in when you die and take half of it.  In the cases of a small business owner or farmer, this usually forces the liquidation of the business and property just to pay the tax man.  This creates enormous hardship on the family left behind who may depend on that business.  And for what?  So that some politician can spend the money.  The estate tax is an offensive practice. 

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In the end we see what we all knew.  Obama is your typical tax and spend liberal.  His “new vision” for America is the same old tired vision shared by the likes of Dukakis, Kerry, Gore, Carter, Wellstone, and on and on and on.

Posted by Owen at 1025 hrs
Politics + Politics - General