Problems Within the Obama Tax Plan

About 7 days left to Election 2008. Which means we only have 7 more days to really look into the bill of goods being pedaled.

The Obama tax plan. He's going to "cut taxes" for 95% of working Americans. That's what he said. And he said he is going to make the rich pay more taxes. Well, that latter statement seems open for some interpretation on the part of the Obama camp.

To Joe the Plumber, he indicated the rich were those who made $250,000 or more. Joe Biden said that the rich were those that made "over $150,000." Later, Barack claimed the rich were those who brought in over $200,000. So which is it? And will that change again once you are in office?

Let's let that go for now. Let's take a look at some specifics of Sen. Obama's plan.

Barack and the Dems want to get rid of the Bush tax cuts. Because they were bad for middle class people. In fact, Obama has said that the Bush Tax cuts were only for the wealthiest Americans. ("We heard the President say he wants to make tax cuts for the wealthiest Americans permanent, when we know that at a time of war and economic hardship, the last thing we need is a permanent tax cut for Americans who don't need them and weren't even asking for them. What we need is a middle class tax cut, and that's exactly what I will provide as President.") So how did those tax cuts really effect the middle class.

Ned Barnett, of The American Thinker notes that on the 2000 tax table (pre-Bush tax cuts), someone making $50,000 and married filing jointly, were taxed $11,143. In 2003 the taxes were $9,304. And in 2004 they were $9231. The tax cuts expire in 2010 and go back up to $11,143. Which means that the tax liability of this married couple will INCREASE by $1,912.

For a couple making $75,000, that would be an increase of $3,074. And for a couple earning $100,000, there would be an increase of $3,824.

Even though these incomes are WELL below the lowest figure cited (by "Anvil" Joe Biden) as a definition for who is rich, there will be an increase, not a decrease in taxes owed.

But then there is the tax cuts Obama promised. Looking this over, things don't make sense in relation to what Sen. Obama is saying on the campaign trail. For one thing, letting the Bush tax cuts go away is not considered a tax increase by Obama. If I have more going out of my paycheck, it seems to me that this is an increase. Next is his additional promise not to increase taxes for anyone making $250,000 or less. He has proposed raising the cap on Social Security from about $94,000 to $250,000. Which means that people making between those two figures will see an increase of 12.4% of everything they make; something they don't under the current tax structure.

Next, Obama says he wants to raise the capital gains tax from 15% to 20%. This will teach those "fat cats" to invest moeny, huh? Only problem with this is that it doesn't matter what you make (even all you making under $250,000). If you have any investments outside your 401K or IRA, you are going to see a 5% INCREASE in your taxes.

You may not say this affects you, it only hurts the rich people. Well, as a blue collar worker in the telecom industry, one of our bonus perks was the ability to receive stock options. We could cash these in at a really good rate right away. This made Christmas shopping a more do-able thing for me. But under Obama's plan, I would have to paid an additional 5% on that bonus deal. And I was only making about $50,000 at the time. Way, way under Obama's $250K. By no means a rich fat cat.

Onward to his pledge to tax big corporations (he really seems to have it in for Exxon, since he uses them a lot in his stump speeches). Even a non-college grad such as myself sees that this is a really bad idea. Even though this will not directly tax our paychecks, it will certainly take money (maybe even all of it) out of our pockets.

Increase the taxes on big corporations and they will pass along the increase to the consumer, cut jobs and other expenses (which could affect the suppliers to these big corporations, often small businesses), or just decide to move operations to a country that doesn't tax them so high. If you don't beleive this would happen just look at business history. Companies move from state to state in order to avoid paying higher taxes. Delaware makes a nice living by enticing businesses to relocate by having the lowest tax rate in America. Cessana and Beechcraft have moved their plants from Wichita to Mexico. Call centers have moved to other countries like India and speaker manufacturer Harman International moved its plant from Wisconcis to Mexico.

"Trickle up" economics doesn't work if those at the bottom don't have jobs to buy products and services offered by big companies. The idea that if you give money to the bottom part of the economic food chain they will buy more and stimulate growth, thus increasing company profits and making up for the higher taxes, is just a naive belief.

The next item on the Obama tax plan is the fact that he wants to simplify the middle class tax filings "so that millions of Americans will be able to do their taxes in less than five minutes." In doing so, I suppose the hope is that you won't notice the caveats to certain tax breaks. You can only claim certain housing tax breaks if your house falls into specific categories. Another break is only applicable if you are married, filing jointly have one child in college and one not. The proposed tax codes necessary in order to recieve the tax breaks Obama promises in his stump speeches, make getting the tax breaks difficult.

He wants to raise the minimum wage, yet there are very few who actually recieve minimum wage. The reason being that no one is able to surviv on a minimum wage paycheck. Except, perhaps, illegal immigrants. (Illegal Immigranst often find ways to vote since some states do not require ID, merely a bill with an address.)

Within his tax plan, Obama states he wants to ensure freedom to unionize. This will add an indirect tax because unions collect dues form their members. And if strikes are called, wages dry up with each passing day of the strike.

His plan also includes a section on ensuring more accountability in the subprime mortgage industry. This is ironic because George Bush tried to do just this in 2003 and John McCain attempted this in 2005. Two people he claims were responsible for the current crisis and whose "failed policies" he wants to get away from.

Not all of Obama's ideas in his plans are bad; such as his thoughts on reforming Bankruptcy Laws to protect families facing a medical crisis or his idea of creating a credit card bill of rights. And I really like his thoughts on giving incentives to companies that keep jobs here in the US. But the major portions directly relating to taxation are dangerous in today's economic evionment and are glossed over in both his speeches and by the major media outlets.

As a plan, I think this one should recieve a failing grade as being bad for America.

Sources:

http://www.irs.gov/formspubs/

http://www.issues2000.org/economic/barack_obama_tax_reform.htm

http://www.barackobama.com/issues/economy/

http://www.americanthinker.com/2008/10/senator_obamas_four_tax_increa.html