Site search
sponsored by
News
Opinion
I had a shocking conversation with a well-informed voter the other day. She asked about Barack Obama's “tax cut for 95 percent of Americans.” I laughed, noting that it was going to be quite a trick to give a “tax cut” to the roughly 40 percent of Americans who don't pay federal income taxes.
“What?” She asked.
It stopped me dead in my tracks.
“After deductions, about 40 percent of Americans don't end up owing income taxes,” I explained. “Barack Obama's idea of a 'tax cut' for them is to send them a 'refundable tax credit.' In other words, he's going to cut everyone a government check.” (“Spread the wealth around,” indeed.)
We're days away from a national election, and no one in the media has even bothered to explain Obama's “tax cut.” No one has broken down just what Obama is proposing and what it will mean for you, your family budget, your retirement savings and your job security.
Obama's tax plan includes four main components: Higher marginal rates; higher estate taxes; higher corporate taxes; and higher taxes on investments. Let's go through them, one-by-one.
Start with the now-famous “Joe the Plumber” tax which would raise taxes on income over $250,000. (Is it $250,000? Obama's new ad now clearly says $200,000. Just this week, Joe Biden said it was $150,000. So who really knows? It seems to be dropping daily.) According to the Wall Street Journal, the combined Obama tax plan would “add up to about a 10-percentage-point hike in marginal tax rates for those making more than $250,000 a year, including millions of small businesses that pay taxes at individual rates.”
And there's the problem. The “Joe the Plumber” tax raises taxes on small businesses, crushing entrepreneurial job creation at the most basic level. Most small businesses are LLC's or S-corporations. Every net dollar they earn is taxed as “income” for the owner. Even if a small business owner decides to take a small salary each year and leave money in his or her business for future investment or payroll, all of that money is taxed as “personal income.” Moreover, many small businesses live from contract to contract. They might receive a large check at the end of a year and then set that money aside to make sure they can make payroll for upcoming lean months. Obama's plan raises taxes on that money, perversely calling it “income.” In the real world, that money is often next month's paycheck or next year's job security for employees.
Barack Obama is also calling for higher estate taxes: More “tax the rich” class warfare, more real-world pain for working Americans. The current estate tax rate is scheduled to sunset over the next few years. Barack Obama will set it at 45 percent. For Bill Gates and Warren Buffet, that might not be that big a deal, but what about a family farm or small business? Many are worth enough to trigger the estate tax but only produce a modest income for the owners. Those farms or businesses are taxed at the “value” of the company, not for the revenue they produce. All too often, the only way the next generation can cover their estate tax bill is to sell off the farm or business. Most “Mom and Pop” small businesses don't survive to the next generation. The estate tax destroys them.
But what if you don't own a small family business, don't work for a small family business or don't shop at small family businesses? Well, do your parents own their home? If they passed away, would you be able to write a check to cover the estate taxes on the value of that home, or would you have to put it on the market in order to pay the government? On Dec. 31, 2010, the estate tax is scheduled to expire. Barack Obama wants to set it to 45 percent for the highest marginal rates. Part of the American Dream is that our children will live better than we do, that we'll be able to create something and pass it on. Barack Obama's tax plan makes that dream unattainable for many Americans.
Barack Obama will raise taxes on “big oil.” Who do you think actually pays for those taxes on “big oil?” We do, of course. Everyone pays, regardless of whether or not we can afford it. We pay higher prices at the gas pump and higher prices for our groceries. (It takes gas to run farm equipment and the trucks that get the groceries to the supermarket.) Barack Obama's higher taxes on “big oil” will hurt lower-income Americans the most. While they might make for a nice sound byte, taxes on “big oil” are among the most regressive and punitive taxes. Remember those 40 percent who don't owe federal income taxes? Ironically, Barack Obama's plan means they take less money home at the end of the week.
Finally, a question: How's your 401k these days? Your pension? Stocks have plummeted as investors have pulled their money out of the market. Yet just as the market is crashing, Barack Obama is planning to raise taxes on capital gains and dividends, further discouraging investment and cutting an even larger chunk of money out of the stock market. Were you planning on retiring anytime soon? Under an Obama administration, you might be working a few extra years.
We've seen this type of “tax the rich” mentality before. In 1989, President George H.W. Bush and the Democrat-controlled Congress passed a 10 percent “luxury tax” on yachts priced at more than $100,000, thinking that the “rich” would easily be able to afford the surcharge. What happened? Just two years after the new tax went into effect, the New York Times reported, “In the last two years, about 100 builders of luxury boats—recreational craft costing more than $100,000—cut their operations severely and laid off thousands of workers.”
Thousands of workers lost their jobs: Machinists, tradesmen, carpenters, laborers, designers. The “tax the rich” mentality—especially higher taxes on business—sends lower and middle income workers to the unemployment office. Higher estate taxes destroy the ability to pass small businesses, family farms or homes on to the next generation. Higher taxes on “big oil” lead to regressive cost increases at the gas pump and the grocery checkout lane. Higher taxes on investments leads to reduced values for retirement accounts, 401ks and pensions.
That is what Barack Obama is proposing. That is his change for America. Look at it this way: Maybe you can use your government check—oops, I mean “refundable tax credit”—to pay for it all. You might even want to spend it on some new resume paper. You're going to need it.
“What?” She asked.
It stopped me dead in my tracks.
“After deductions, about 40 percent of Americans don't end up owing income taxes,” I explained. “Barack Obama's idea of a 'tax cut' for them is to send them a 'refundable tax credit.' In other words, he's going to cut everyone a government check.” (“Spread the wealth around,” indeed.)
We're days away from a national election, and no one in the media has even bothered to explain Obama's “tax cut.” No one has broken down just what Obama is proposing and what it will mean for you, your family budget, your retirement savings and your job security.
Obama's tax plan includes four main components: Higher marginal rates; higher estate taxes; higher corporate taxes; and higher taxes on investments. Let's go through them, one-by-one.
Start with the now-famous “Joe the Plumber” tax which would raise taxes on income over $250,000. (Is it $250,000? Obama's new ad now clearly says $200,000. Just this week, Joe Biden said it was $150,000. So who really knows? It seems to be dropping daily.) According to the Wall Street Journal, the combined Obama tax plan would “add up to about a 10-percentage-point hike in marginal tax rates for those making more than $250,000 a year, including millions of small businesses that pay taxes at individual rates.”
And there's the problem. The “Joe the Plumber” tax raises taxes on small businesses, crushing entrepreneurial job creation at the most basic level. Most small businesses are LLC's or S-corporations. Every net dollar they earn is taxed as “income” for the owner. Even if a small business owner decides to take a small salary each year and leave money in his or her business for future investment or payroll, all of that money is taxed as “personal income.” Moreover, many small businesses live from contract to contract. They might receive a large check at the end of a year and then set that money aside to make sure they can make payroll for upcoming lean months. Obama's plan raises taxes on that money, perversely calling it “income.” In the real world, that money is often next month's paycheck or next year's job security for employees.
Barack Obama is also calling for higher estate taxes: More “tax the rich” class warfare, more real-world pain for working Americans. The current estate tax rate is scheduled to sunset over the next few years. Barack Obama will set it at 45 percent. For Bill Gates and Warren Buffet, that might not be that big a deal, but what about a family farm or small business? Many are worth enough to trigger the estate tax but only produce a modest income for the owners. Those farms or businesses are taxed at the “value” of the company, not for the revenue they produce. All too often, the only way the next generation can cover their estate tax bill is to sell off the farm or business. Most “Mom and Pop” small businesses don't survive to the next generation. The estate tax destroys them.
But what if you don't own a small family business, don't work for a small family business or don't shop at small family businesses? Well, do your parents own their home? If they passed away, would you be able to write a check to cover the estate taxes on the value of that home, or would you have to put it on the market in order to pay the government? On Dec. 31, 2010, the estate tax is scheduled to expire. Barack Obama wants to set it to 45 percent for the highest marginal rates. Part of the American Dream is that our children will live better than we do, that we'll be able to create something and pass it on. Barack Obama's tax plan makes that dream unattainable for many Americans.
Barack Obama will raise taxes on “big oil.” Who do you think actually pays for those taxes on “big oil?” We do, of course. Everyone pays, regardless of whether or not we can afford it. We pay higher prices at the gas pump and higher prices for our groceries. (It takes gas to run farm equipment and the trucks that get the groceries to the supermarket.) Barack Obama's higher taxes on “big oil” will hurt lower-income Americans the most. While they might make for a nice sound byte, taxes on “big oil” are among the most regressive and punitive taxes. Remember those 40 percent who don't owe federal income taxes? Ironically, Barack Obama's plan means they take less money home at the end of the week.
Finally, a question: How's your 401k these days? Your pension? Stocks have plummeted as investors have pulled their money out of the market. Yet just as the market is crashing, Barack Obama is planning to raise taxes on capital gains and dividends, further discouraging investment and cutting an even larger chunk of money out of the stock market. Were you planning on retiring anytime soon? Under an Obama administration, you might be working a few extra years.
We've seen this type of “tax the rich” mentality before. In 1989, President George H.W. Bush and the Democrat-controlled Congress passed a 10 percent “luxury tax” on yachts priced at more than $100,000, thinking that the “rich” would easily be able to afford the surcharge. What happened? Just two years after the new tax went into effect, the New York Times reported, “In the last two years, about 100 builders of luxury boats—recreational craft costing more than $100,000—cut their operations severely and laid off thousands of workers.”
Thousands of workers lost their jobs: Machinists, tradesmen, carpenters, laborers, designers. The “tax the rich” mentality—especially higher taxes on business—sends lower and middle income workers to the unemployment office. Higher estate taxes destroy the ability to pass small businesses, family farms or homes on to the next generation. Higher taxes on “big oil” lead to regressive cost increases at the gas pump and the grocery checkout lane. Higher taxes on investments leads to reduced values for retirement accounts, 401ks and pensions.
That is what Barack Obama is proposing. That is his change for America. Look at it this way: Maybe you can use your government check—oops, I mean “refundable tax credit”—to pay for it all. You might even want to spend it on some new resume paper. You're going to need it.
