The magic number is 250K. That certainly isn't "everybody".
Well, after the debate, NBC strategists reviewed and debunked some of McCain/Obama's statements given during the debate. He also broke down the Obama tax plan. This person said that the 250K/95% number is only for households WITH children. So, I guess my taxes will rise after all, lol!
The magic number is 250K. That certainly isn't "everybody".
Well, after the debate, NBC strategists reviewed and debunked some of McCain/Obama's statements given during the debate. He also broke down the Obama tax plan. This person said that the 250K/95% number is only for households WITH children. So, I guess my taxes will rise after all, lol!
Not true. 250K AGI is AFTER taxes. It is not the salary on your W-2.
Joined: 27 Nov 2004 {Posts: 1466 } Location: Hudson Valley, NY
Posted: Tue 30 Sep 2008 19:43 Post subject:
sagascend wrote:
Melani23 wrote:
Richard Miller said:
Quote:
The magic number is 250K. That certainly isn't "everybody".
Well, after the debate, NBC strategists reviewed and debunked some of McCain/Obama's statements given during the debate. He also broke down the Obama tax plan. This person said that the 250K/95% number is only for households WITH children. So, I guess my taxes will rise after all, lol!
Not true. 250K AGI is AFTER taxes. It is not the salary on your W-2.
An argument against Obama's tax plan
By GROVER G. NORQUIST | 7/11/08 4:58 AM EDT
The Tax Policy Center and the Barack Obama campaign used some sleight of hand this week in Politico. To quote Eric Tolder of the TPC, “Most small-business people, like most everyone else, are not really high-income.” While this is true, it completely and totally misses the point.
Let’s start with the definition of a “small business.” Most will tell you that small-business income constitutes income derived from sole proprietorships, partnerships and Subchapter S corporations.
The conservative argument (and that of the John McCain campaign) is that Obama’s stated plan to raise taxes on households making $250,000 or more in income is a tax increase on small business. The simple answer to this dilemma can be found in the IRS Statistics of Income Bulletin (Table 1.4, for those who are interested).
So what do the data say?
In 2006 (the latest year available), $706 billion of such income was reported to the Internal Revenue Service. Of this, about half was reported by households in the top marginal income tax rate. Interestingly, two-thirds of this income was reported by households making $250,000 per year or more — the very same households that Obama wants to increase taxes on.
The Obama campaign maintains that the number of small-business owners is what’s important. Economists know what matters is the tax rate that’s applied to the bulk of small-business income. Make no mistake about it: Obama’s plan to raise taxes on households making more than $250,000 will raise taxes on most small-business profits in America.
What type of tax rate are we talking about? Currently, S corporations face a top tax rate of 35 percent, while sole proprietors and general partners face a tax rate of 37.9 percent (since they’re responsible for paying both income tax and the Medicare component of the payroll tax).
Under Obama’s plan to let the scheduled 2011 tax rate hikes occur, and his plan to raise the self-employment tax on those making more than $250,000, the S corporation rate would rise from 35 percent to 39.6 percent. The sole proprietor and partner rate would rise from 37.9 percent all the way up to a staggering 50.3 percent. Many Democrats in Congress have proposed making all small businesses (including S corporations) pay this 50-plus percent rate. A small business tax rate that high would be the highest marginal rate faced by them in nearly a quarter-century.
What would a world look like where two-thirds of all small-business income would be taxed at a 50 percent rate? The economic law that “taxing something more and getting less of it” would apply. Fewer Americans would be interested in opening or expanding small businesses. Tax evasion and legal tax avoidance would spike, as tax shelters would once again become a booming industry. Since small businesses create a majority of jobs in America, Main Street closing up shop will have a direct impact on the family budget, as well. Plants and equipment will go unused. Despite the misguided opinions of static scorers in Washington, federal tax revenues will likely decline as the economy staggers into a full-on recession.
What’s the alternative? One place to look is the optional alternate tax system originally proposed by Congressman Paul Ryan (R-Wis.) and now endorsed by McCain. It would give households (including those with small business income) a choice between the current tax code and one with a top rate of 25 percent on all income over $100,000. This would have the beneficial effect of lowering the tax rate on most small-business income by 10 percentage points. Small businesses haven’t faced a tax rate that low in quite some time and would be likely to respond with the creation of new businesses and more investment in existing businesses.
The McCain small business tax plan doesn’t end there. For those businesses that are organized as conventional corporations, the top tax rate would fall from 35 percent to 25 percent, the European average. For all businesses, technology and equipment — which now must be slowly “depreciated” over many years — would be immediately expensed in year one.
Stepping back, voters and policymakers should ask themselves whether they want two-thirds of small business income taxed at a 50 percent tax rate or if they want nearly all small-business income taxed at a 25 percent tax rate. They should ask themselves whether it’s healthier for small businesses to write off a computer over six calendar years or to simply write it off in year one. To America’s small business sector, the answer is obvious.
Grover Norquist is president of Americans for Tax Reform and author of "Leave Us Alone — Getting the Government’s Hands Off Our Money, Our Guns, Our Lives."
I guess if you're a small business entreprenuer, a vote for Obama is a vote for an extra hand in your wallet.
I should probably split this as I anticipate it to grow.
Joined: 27 Nov 2004 {Posts: 1466 } Location: Hudson Valley, NY
Posted: Tue 30 Sep 2008 20:04 Post subject:
Quote:
How Will Obama's Tax Plan Impact the Economy?
Steven Malanga
This year’s presidential election has sparked perhaps the most intense and lengthy discussion of taxes since the campaign of 1988, when George H.W. Bush infamously told the GOP convention to ‘read my lips: No new taxes.”
Barack Obama has generated much of this year’s discussion with his plan to raise taxes on those earning $250,000 and up and reduce them on middle and lower income families. There’s even been an increasingly heated debate online about whether people who earn $250,000 annually can be classified as rich. But as fascinating as the discussion has become, we seem to be drifting away from the important question of what impact do taxes have on work and productivity (and hence the economy), especially among our most industrious and innovative citizens--those whom Ayn Rand once said powered the “motor of the world”?
To understand what’s at stake it’s important to consider not just how much money people earn, but how much in income taxes they now pay. We seem to have lost sight of how drastically this differs for households in different brackets. Simply put, at $250,000 in taxable annual income, a married couple filing taxes jointly would now pay about $62,000 in federal income taxes. By contrast, a couple earning $50,000 a year, which is about the median income in the U.S., would pay $6,750 in taxes. Although the $250,000 couple is in the 33 percent tax bracket (meaning every additional $1 in taxable income they would earn is taxed at 33 percent), the couple is actually paying about 25 percent of their total taxable income to the feds. At the same time, the median income couple pays about 13.5 percent of their income in taxes. In actual dollars, this translates into slightly less than 10 dollars in taxes from the higher income couple for every one collected from the median income family.
This ratio stays pretty much the same if one considers the impact of all federal taxes, not just the income tax, on these same households, according to the nonpartisan Congressional Budget Office. In its study Historical Effective Federal Tax Rates, the CBO noted that we actually pay a host of federal taxes in addition to the income levy, including the payroll tax, excise taxes and even corporate taxes, whose cost is borne ultimately by individuals. Figuring all federal taxes into the mix, as well as income from all sources, including government transfers, the CBO study suggests that the effective tax rate of a family with a taxable income in the range of $250,000 remains at slightly under double that of a couple earning $50,000.
Now Barack Obama and people who think like him would look at these numbers and argue that, after paying income taxes, the $250,000 family still has about $188,000 left to spend on other things (including paying other federal, state and local taxes, housing, food, etc.), while the $50,000 family has about $43,250 left. That’s too much of an imbalance so let’s raise taxes on the higher income family to finance cuts for middle income earners and programs that provide lower income families with assistance, says Obama. He calls this his attempt to create "a sense of balance fairness in our tax code." He personalizes it by adding that, "It is time for folks like me who make more than $250,000 to pay our fair share."
But looking at these numbers, the larger question for the economy is, at what point when we tax someone’s additional earnings in order to make our tax system ‘fairer’ does that person simply work less because government is taking so much more of the fruit of his effort (up to 39.6 percent under Obama’s plan, in addition to state taxes)? One could fill an entire library with economics dissertations on this subject, though it’s at least safe to say that the disincentive to work under Obama’s plan won’t be as great as it was when our top tax rate was 90 percent, but it will be greater than it is under today’s tax rates.
But the larger question is how much of an impact would it have on our economy if these folks did indeed work less? Can the rest of us simply pick up the slack if our most productive and innovative workers cut back, or do these folks add something that can’t easily be replaced? Judging by comments on some websites I’ve seen, many people view high income earners as little more than privileged exploiters, or slackers with good family connections, or people who just happened to be in the right place at the right time.
By contrast, it was Rand who recognized that this group also includes our most pioneering and inventive workers, the individuals “of the mind” whose innovations and ambitions drive the motor of the world and who are responsible over time for creating modern society, without which the rest of us would still be tilling ground in some pre-industrial world.
And so the debate about taxes is really a debate about the role that our biggest earners play in our economy. Increasingly, those who sit at the center of the Democratic Party seem to minimize that role. One theme of the Democratic convention last week was that government works, and that apparently applies especially to the economy. And so op-ed columnists now tell us that the real key to growth is the Democratic model of using government to drive the economy through vehicles like research dollars (although those research dollars come from taxes on private earnings). We seem likely headed, in other words, toward a period of rule by those who believe that it is government which is the motor of the world, and that it’s selfish to think about keeping too much of the fruits of your labor for yourself.
Will the rich, the productive, the inventive, buy it? Or will they see their ambition and learning and invention as unappreciated and overtaxed, and withdraw some of it, at great cost to society? It will be an interesting and revealing experiment.
Steven Malanga is an editor for RealClearMarkets and a senior fellow at the Manhattan Institute
But looking at these numbers, the larger question for the economy is, at what point when we tax someone’s additional earnings in order to make our tax system ‘fairer’ does that person simply work less because government is taking so much more of the fruit of his effort (up to 39.6 percent under Obama’s plan, in addition to state taxes)? One could fill an entire library with economics dissertations on this subject, though it’s at least safe to say that the disincentive to work under Obama’s plan won’t be as great as it was when our top tax rate was 90 percent, but it will be greater than it is under today’s tax rates.
Ridiculous. Again, proponents of the Laffer effect rarely if ever concede that our current tax rates and the tax rates under Reagan/Bush/Clinton (rates the Obama plan would reinstate) do not begin to approach the rates at which this effect is noted.
I wrote in another thread wrote:
The Laffer hypothesis is the basis of recent Republican taxation and spending policy, which basically states that cutting income taxes raises tax revenue. While this hypothesis is supported when marginal tax rates are extremely high, U.S. tax rates are much too low for this proposition to hold up.
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