In light of the major news today and over the weekend, I think it’s an appropriate time to lay out the facts about Obama and McCain’s tax policies. Now, let me note that given the ever increasing worry over the long-term prospects for a continued recession, I wouldn’t be very surprised if these policies change over the next two months, and I’d be very surprised if either candidate sticks to them in office. That being said, we only have the information currently at hand, and this is as good a starting point as any.
CNN Money tackles this issue in an article, but the table to the right that they produce based on data from the non-partisan Tax Policy Center analysis of the candidates’ programs sums everything up quite well. Let me pause to say something here: this is an independent and agreed to be credible analysis of the candidates’ policies; if we can’t agree upon the chart to the right as fact, or at least as a close approximation appropriately used as a jumping-off point for discussion, we’re not going to be able to have a very constructive discussion here.
I am, and have been for some time, a big supporter of Obama’s tax plan as illustrated to the right. Over the last 8 years, the only segment of the population that has seen an increase in real, after-expenses income are the top 5% of income earners. Moreover, the increase within this group has been substantial. And while there’s no doubt that Obama’s tax increases for those making above $607K is substantial, it’s not until you get to the top 1% of earners ($2.9M and above) that you see a real hit (and let it be noted, that most of those making more than $2.9M a year, are making way more than that). Plus, the hit isn’t really even a hit if you subscribe to the (I think legitimate) liberal talking point that this merely rolls back the Bush temporary tax cuts.
For nearly everyone making under $607K a year, and for everyone making under $227K, you see a tax decrease under both plans. But if you make under $112K, you’re going to see a decrease of substantially more under Obama.
Now, here’s the kicker, and I think in light of our current economic situation, it’s a very untenable and irresponsible kicker:
Under both plans, all American taxpayers could pay a price for their tax cuts: a bigger deficit. The Tax Policy Center estimates that over 10 years, McCain’s tax proposals could increase the national debt by as much as $4.5 trillion with interest, while Obama’s could add as much as $3.3 trillion.
Which means we need more revenue, less spending, or (ideally) a combination of the two. I would love to see someone force both candidates to outline what budget cuts they’d make; especially with McCain claiming he could find $1 Billion in cuts tomorrow…
Well, we know what Alan Greenspan thinks:
In an interview with Bloomberg Television, Greenspan argued that the country couldn’t afford the tax cuts being proposed by John McCain without an equally massive reduction in spending.
“I’m not in favor of financing tax cuts with borrowed money,” he said. “I always have tied tax cuts to spending.”
But the real question is what do you guys think?
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We actually agree on something.
“I would love to see someone force both candidates to outline what budget cuts they’d make”
Although I would just ask they do this instead of force. “Force” is such a left wing word
Like all political seasons, seems full of blah blah blah instead of actual productive discussion. Being an engineer by trade, sweeping broad statements mean nothing to me when the details are so critical.
Anyway, whoever the bozo is running our country I hope they actually do reduce the spending instead of just taking the credit for reducing taxes. I’m sure that finding efficiencies is a little boring. And any real cuts in government may be good management, but it’s really bad PR.
Well, if I only voted by how much I’d get back in taxes I’d be a fool to vote for McCain. It might be worth posting what the median income is in MN. According to this recent Strib article it has declined in the last two years, although it still remains high relative to that of other states. http://www.startribune.com/local/27511554.html?elr=KArksLckD8EQDUoaEyqyP4O:DW3ckUiD3aPc:_Yyc:aUUJ
McCain v. Bush relative to tax cuts is a wash for me personally. HOWEVER, Obama has a plan to withdraw from Iraq, has outlined how to save significant dollars of medical waste, and promises to cut corporate handouts.
Furthermore, a vast majority of Americans will be better off under Obama, from a taxation perspective….including nearly all posters on MNP.
The choice is clear to me.
What you don’t mention is the Tax Policy Center is a left of center organization tied to the Brookings Institution and the Urban Institute. What your numbers don’t indicate is that McCain phases out income taxes altogether for lower income workers, who would only pay payroll taxes while Obama drastically increases both income and payroll taxes for upper income earners - including small business owners.
Chris, if by left of center, you mean center, then you hit the nail on the head.
No, Matt, the Tax Policy Center and the Brookings Institution and the Urban Institute are all squarely liberal.
“Liberal” is not “left” no matter how many times you repeat it. By leftist criteria, liberals are solidly centrist. Liberals want to cushion capitalism for the poor, not replace it.
Minnesota Republican blogger Chris, I agree 100%,
Everybody knows that any organization that disagrees with Republican bloggers is leftist, therefore anything they say can and should be misrepresented, ridiculed, and made irrelevant.
The fair and balanced FOX news is a good example of a centrist organization, that is just common sense.
Great Job Minnesota Republican blogger Chris
Sorry but $700 is not difference maker for working America when the overtaxed businesman lays them off.
When tax rates are prohibitive, people find legal ways to work around them. Deferred income, investing in tax shelters, etc. Tom Moore, an Economist, produced numbers today showing that when the top rate was at 70% in 1981, the richest 1% paid 17% of total income taxes. Today, with the top rate at 35%, the richest 1% pay 39% of total income taxes.
I know of some business partners who are selling their business this year for about $5 million each. This is their nest-egg. It is their pension. It is what they have invest all of thier careers in. They look ahead to an Obama administration and a certain tax increase, and they know that they will walk away with at least $1 million more by selling today.
That is just one anecdote, but my point is that people are smart enough to change their behavior in response to tax policy. We should be less hellbent on wealth shifting and focus more on how to keep our nation’s expenses down.
Obama has proposed a federally funded Classroom Corps, Clean Energy Corps, doubling the Peace Corps, and $4,000 to each college student who does community service (his campaign says that one alone will cost $10 billion per year). Add to that a nationalized health insurance, and Obama is signing future administrations up for commitments that will turn into the next Medicare and Social Security debacle.
Wow. I’m impressed by Mike and DantheMan actually putting up a real argument. Seriously, this is the most substantial conversation I have seen so far on a political blog’s comment section.
Here’s my take:
I’m opposed to McCain’s tax cuts for one huge reason. The National Debt. The debt is the number one cause of inflation. It’s what’s driving up the price of essentials like food and clothing. McCain proposes MORE programs without bringing in any more money to the government to pay for it. So, I assume that these programs will go into the debt, for all of us to pay for with the loss of social security fifty years from now.
Now let’s look at this trickle down idea that the conservatives are so fond of. Well, how has it worked? We’ve had decreased regulation in the market place in the last eight years, and now we have enormous investment banks going under. We’ve had corporate profit rates INCREASE over the past few years, yet a net LOSS in the number of jobs. Is the trickle down effect working? If so, I have yet to see it.
From what I see, the “overtaxed businessman” is laying off workers even when they are making record profits and the wealth disparity in this country is the largest it has been in modern history. I don’t think the problem lies in overtaxing business men. I think the problem lies in a hole in innovation due to the money that lies in past, inefficient technology. Americans need a new industry, and that industry is going to be everything green. Electric cars, hydrogen cars, solar power, wind power, nuclear, and even ocean wave energy.
I find it ironic how the same people who make the argument that “big corporations” have too much power and favors from the government also point to those corporations who are failing as a sign of troubled government policy.
The people left holding the bag on Lehman and Merrill are the shareholders. As it should be. At least they aren’t getting government bailouts. This business of socializing losses while privatizing profits is BS.
The way our economy works, people can make a business successful or they can make it crater. When it is a success, they will probably get handsomely rewarded as will others in their organization. Not all, but many. If a business tanks, the person who ran it into the ground is accountable. That kind of clear accountability when government bureaus try to run the same operation.
One of the most encouraging stats I read recently was from the WSJ. It found that of the lowest income 20% of tax filers in 1996, 58% of them had moved up to a higher bracket by 2005. Likewise, the top 1% of filers in 1996 were earning, on average 52% less in 2005.
We have income mobility in this country, and we need to make sure that never goes away. One of the best ways I can think of to gaurantee that opportunity for people is to create an abundance of jobs and an environment where entrepreneurs can create and innovate unencumbered.
And of course the way to create an abundance of jobs is to elect Democrats.
I mean private sector jobs.
So did I. Republicans are absolute job killers when it comes to the private sector.
Dan quite lying… Republicans have created a lot of jobs in China and Iraq. In the US of A not so much…
LOL. Fair enough, amuseinc.
What we have to do is create an environment that brings those jobs lost to China and India. My thinking is to tax them the difference between what it costs to be made there and what it costs to be made here. Anyone have a though on that?
What about dropping all of these income taxes and go with a tax on most everything? What is David Dillon’s Plan? Anyone know? I like David in that he will not be spoiled by special interests and will listen to the likes of you and me. Madia and Paulsen? They will have to listen to those special interests that paid for them.
Independence Party all the way. Time for a real change!!
I just spent five minutes on David Dillon’s website and holy crap is that guy an assclown.
Dan,
Really?
There are more jobs today than there were are the beginning of the Bush recovery. How is that killing jobs? Please explain.
Basic economics tells you that as profits get slashed more by taxes something has to give. If a 100 million dollar corparation see’s even 1% more in taxes $1 million has to be made up be it laying off employees raising the price of it’s product (passing the tax on to the middle class), or by leaving the market.
Corparations are for the most part walking a tight line between making couple million dollars and losing 10’s of millions of dollars. We need to be greatful they take on the risk rather then hate them for it. Unless of course you find that none of their products are worth your while.
Really, Mike? Reducing executive compensation or bonuses is completely off the table — the only options are screw the rank-and-file or screw the consumer?
Wow. You can learn a lot about economics from a blog.
Mike -
Good points.
Add to that the fact that India and China are in a mode of lowering their cost of good and services. How can we remain competitive if, at the same time, we are in a mode of making our businesses raise their prices?
In theory, I would love a tariff system to replace the current income tax system. The issue is that you run the risk of those countries reciprocating. It would be nice to know that all clothing was coming from America instead of China, but do Dell and Gateway really want those countries to stop buying their products as well? We have a lot to lose potentially.
Plus, are the types of jobs that are easy to outsource to China — textiles, making our plastic toys, etc., really the ones that will create middle class success if brought back to our country? The real opportunity lies in retraining those workers to do more value-added jobs in the sciences or in entreprenurial pursuits.
DantheMan, I agree 100%,
Everybody knows that the tariffs India and China bills American industry for is exactly the same as what the U.S. tariffs are for them. They are 100% equivalent, and we need to keep that exactly the way it is.
Unfortunately, U.S. labor costs cause the quality of American made items to be irrelevant. Everyone wants cheap, low quality crap from China, that’s just common knowledge. That’s why tax cuts for companies that export jobs makes sense! The people demand things not made in the U.S.A., because they can’t afford it.
Great Job, Minnesota Republican blogger DantheMan
It is draconian, TFRWG, to assume that all items made in China or India are crap. The fact is that when the American consumer buys a pacemaker, they want it to be top quality. But when they buy a pair of gloves, they will be content with something made in China that is $5 less because, hey, it is a pair of gloves.
Let’s do what we can to get more jobs in American. But let’s make sure we get the right jobs. We won’t be better off by “scoring” more napkin factories that would have otherwise been in China.
WHEN will SOMEONE be brave enough to tax the rich (top 2-5%) and be done with it. When you go out to dinner with your wealthier, let’s say, parents: who offers to buy, because they CAN, and they CARE about you? Simplistic, perhaps, but THINK about it…….
Voters need to think about how Obama is going to help the economy grow and keep all of the assistance to the lower class families and cut taxes as well.He talks about lower taxes for everyone but if he plans on offering other ways to help lower and middle class there is no way he will be able to do so with the flow of tax money behind those different ways to assist people.
That means no welfare, no medicaid, and food stamps. Those are the things that are going to be affected. But no one seems to be telling those less fortunate and less educated that they will not have that type of assistance when Obama makes tax cuts.
Furthermore, check this clash videos I found yesterday about the US Presidential candidates have talked taxes. Well, it’s entitled Obama v. McCain on Taxes. Watch these statements - then vote in http://clashorama.com/index.php?id=194
Trickle down economics doesn’t work! We have an economy that is 2/3 driven by consumers. Those consumers need something to spend, not just credit cards and loans. This has been a long time coming, and didn’t happen yesterday.
The frightening thing to me is that Bin Ladin attacked the WORLD TRADE CENTER. He didn’t have troops, so he decided to take us down financially. And look how well it is working.
So, who is really winning the war on terror? Think about it.
Last night Suzie Orman stated that we are in a major depression as bad as the great depression was, and it is only beginning. She said that the lines are going to be starting, because of all of the people that are losing their jobs this week.
Ashwin Madia wrote a great piece on the fact that it is a good thing we did not privatize social security. Could you imagine having to look Grandma in the face and tell her it is okay that her social security trust fund is 80% gone now?! http://blog.thehill.com/2008/09/17/the-collapse-we-escaped-minn-dem-candidate-ashwin-madia/
Mike, your understanding of how corporate taxes are computed is all wrong. Typically, when someone refers to a “100 million dollar corporation” they are talking about its revenues. However, corporate income taxes are not computed based on revenues, but on profits.
For example, assuming a 5% profit before tax, this “100 million dollar corporation” would have $5,000,000 in taxable earnings. Generally speaking, and excluding any loss carryforwards that may exist, the tax rate for that amount of earnings is 34%. Therefore, the tax would be $1.7M. Any tax credits that the company is eligiblr for would be applied after that, reducing the tax further.
Therefore, according to your example, is the tax rate increased by 1% to 35%, the tax on the “100 million dollar corporation” would increase by only $50,000, and not the $1,000,000 you claimed in your statement.
The sky is falling, I guess. Could have fooled me.
Jane,
Fascinating, really. I will gladly buy dinner for my friends or family. I also gladly donate money to feed, clothe, and shelter others, because I do care about others. However, you seem to think that I should be FORCED to pay and/or care for others just because I have more money, mainly through working harder (owned my own business at 13), going to school longer (19 years total fro two professional degrees) and paying for all of it by myself, and then working 18 hours days to get ahead. Sorry Jane, but I will give my money to whom I want, not to whom you want, just becuase I can.
Really:
I highly doubt that you are in the top 2-5% of wage earners.
Of course, your attitude is that of a completely entitled republican, so I suppose I could be wrong.
Really?,I agree 100%,
Where we Republicans want to spend taxpayer dollars is completely different than where these people who disagree with us want to spend it.
Everybody knows the things we Republicans like to spend taxpayer money on are because we HAVE to spend that money, for example no bid contracts with contractors, or bailing our Wall Street. We had no choice but to spend tons (literally) of taxpayer dollars on these things.
Great Job Minnesota Republican blogger Really?
Yes, Dtm, the American investment and finance communities are just a bunch of silly little ninnies running around whining. You’re absolutely right, it’s just Chicken Little situation and we’re so lucky we have wise, brave people like you to set them straight.
What color is the sky in Fantasyland?
And here’s what those wacky, way out partisan nuts at, what’s it called again, oh, yeah, The Wall Street Journal, have to say today:
“The financial crisis that began 13 months ago has entered a new, far more serious phase.
Lingering hopes that the damage could be contained to a handful of financial institutions that made bad bets on mortgages have evaporated. New fault lines are emerging beyond the original problem — troubled subprime mortgages — in areas like credit-default swaps, the credit insurance contracts sold by American International Group Inc. and others. There’s also a growing sense of wariness about the health of trading partners.”
OK. Fair enough.
And how do you propose Government “manage” our economy? I didn’t hear people complaining when the housing market was on fire and the stock market was going up each day.
If the over all tax plan causes financial collapse turning a recession into a depression how much you get back from your 1040 will be moot because the unemployed need not fill them out!
Obama promises to increase spending by $300 billion a year. Obama has proposed raising tax rates, raising tariffs and expanding government regulations, all of which would plunge the United States into a bigger recession and further weaken the dollar. He has proposed to increase capital gains taxes, from 15 percent to somewhere between 20 percent and 28 percent. Incredibly, he has proposed to more than double the tax rate on dividends, from 15 percent to 39.6 percent. He has proposed to increase payroll taxes on workers earning over $250,000 a year to 12.4 percent on income above that threshold and to restore the estate tax to the confiscatory rate of 55 percent. Obama has proposed the exact same policy mix that led to the Depression of the 1930s, and he has no problem with the Fed bailing out more greedy lenders.