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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.

[...]

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. 

—————

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

1. C’mon! Obama is about change! You’re not supposed to question him further! What are you, racist?!

   Posted by Billiam on June 28, 2008 at 1620 hrs




2. Man, for a guy we know nothing about we sure seem to have a lot of detail about his policy proposals.

   Posted by (JavaScript must be enabled to view this email address) on June 28, 2008 at 1952 hrs




3. Obama is your typical tax and spend liberal.

   Unfortunately thanks to the borrow and spend GOP, of 1981 on, this hardly seems to matter anymore.

   Posted by (JavaScript must be enabled to view this email address) on June 28, 2008 at 2048 hrs




4. Amen.  Sad as it is, taxing is usually more responsible than borrowing.  If you hand a Democrat ten bucks, he’ll spend it.  If you hand a Republican ten bucks, he’ll finance something and then come back to you and tell you he needs another three dollars to pay for the interest.

   Posted by Recess Supervisor on June 28, 2008 at 2116 hrs




5. I’ll come out for the estate tax over incereasing the tax rates on current wages.  Although I realize the amounts collected from the estate tax are miniscule compared to what is collected via the income tax. 

   I’d give every person a $5 million dollar exemption indexed to inflation.  Then have the balance taxed at 50%.  Then I’d try to close all estate tax loopholes.  I’ll probably be considered a communist, but if a married couple have a business worth more than $10 million I don’t think it is that wrong to level an estate tax on their death. 

   Increase the annual gift amount to $50,000 per year per person. That would give anyone plenty of opportunity to get to their children millions of dollars over their lifetimes.  At some point it is unproductive and dangerous to a peaceful society to create generations of non-working heirs.

   Posted by (JavaScript must be enabled to view this email address) on June 28, 2008 at 2326 hrs




6. I never understood estate taxes. The money was already taxed when it was earned - why does it need to be taxed again?

   Posted by (JavaScript must be enabled to view this email address) on June 28, 2008 at 2352 hrs




7. A CBO study from 2005 showed that in 2000, only about 1 in 50 estates - roughly 52,000 - were subject to the estate tax.  It further showed that had the ‘04 exclusion limit been in place at the time ($1.5MM), fewer than 14,000 estates would have been taxed.  And there’s an additional value exemption already built into the law for family farms (up to $900K in value beyond what could otherwise be exempted).

   The same CBO study showed that in 2000, fewer than 1,700 farm estates owed any estate taxes and fewer than 10% of those 1,700 lacked the liquid assets to pay the taxes immediately.

   The estate tax kills waaaaaaaay fewer farms than does the lack of interest among survivors to continue running them.  FYI, estate taxes can be paid over a period as great as 14 years.

   The overwhelming majority of small businesses and family farms are never touched by the estate tax.  The remarkable thing is that a bunch of lobbyists and politicians have managed to get the public worked up about an issue that only affects the very wealthiest of Americans.  The boogeyman work the GOP has put into this issue is admirable, that voters are actually fooled into thinking this has any affect on them.

   Call me crazy, but if my government is shit broke and I need to raise some money, taking money from the dead sounds way more appealing than taking money from the living.

   Posted by Recess Supervisor on June 29, 2008 at 0142 hrs




8. Previously, I thought this was all I really needed to know.  Is this summary contradicted by the above post?

   Posted by scott on June 29, 2008 at 1118 hrs




9. The sad thing is that the conservatives are no longer fiscal conservatives.  IMO, “borrow and spend” is worse than “tax and spend”, because you have to pay it back the spending with interest.

   Posted by (JavaScript must be enabled to view this email address) on June 29, 2008 at 1146 hrs




10. The sad thing is that the conservatives are no longer fiscal conservatives.

    That’s a bit overly broad, but I agree in principle.  Fiscal Conservatives are a more rare species than they used to be.

    IMO, “borrow and spend” is worse than “tax and spend”, because you have to pay it back the spending with interest.

    Agreed, to an extent.  Ideally we would spend less and have no need for borrowing or additional taxes, or Heaven forbid… fewer taxes.

    Posted by Owen on June 29, 2008 at 1319 hrs




11. Oh, and Scott.  Yes.  The tax proposals that Obama has put out and listed in this article do not square with whatever math the folks at CNN were doing.

    Posted by Owen on June 29, 2008 at 1321 hrs




12. When it comes to money, Bush is more liberal than FDR.  He can’t remotly be called a fiscal conservative.

    Posted by (JavaScript must be enabled to view this email address) on June 29, 2008 at 1424 hrs




13. To Recess,

    It is not surprising that you once again throw the hatchet at the GOP with half of the data.  It would be refreshing for you to post a complete argument, but that would curtail your ability to dabble in your favorite passtime - GOP bashing.

    The logical argument of double taxation aside, the current system puts and unrecorded tax of millions of dollars of expense for money management that would not otherwise be there.  For people like Recess who have never owned a company, much less had to deal with transition from one generation to the next,  the labor costs involved in planning, management and executing a transfer of control is mind-numbing.

    And before you fire back with the class warfare argument that all of these evil farmers and busines owner can afford these excess costs, understand that the capital they are using for this process could be going to increase their labor force or at the least strengthen the company.

    So the GOP’s supposed “boogeyman” work may not satisfy your big-government mentality, but if the government is sh*t broke, don’t blame the companies and farmers that are the backbone of our economy.

    Posted by (JavaScript must be enabled to view this email address) on June 30, 2008 at 1452 hrs

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