Tuesday, November 04, 2008

Tax Truth 101

Fire of Liberty
While the Obama campaign might have a problem about getting their facts straight with regards to his economic policies, there's a lot of folks who know what awaits if he's elected. One individual who has looked beyond the flowery rhetoric about Obama's tax plans is Grover Norquist, president of Americans for Tax Reform. Now while I could write all day about the bill of goods that Obama is hawking with his "tax cuts" for 95% of the American tax payers(Even when 40% or some 30 million people aren't currently free of a tax burden due to President Bush's tax cut in 03), I figured you'd prefer Grover's ideas. Here's a look:

The critique of the second half of the plan is that Obama’s tax increases will negatively affect a lot more than the top 2 percent of income earners. For starters, they will take a big bite out of America’s household retirement savings.

When Reagan was elected president in 1980 only 20 percent of adults owned stock directly. Today more than 50 percent of households own stock through their 401(k)s, mutual funds, and IRAs. The tax implications of this demographic shift are significant. In 2003, the capital-gains tax rate was reduced from 20 percent to 15 percent and the tax rate on dividends was lowered from 35 percent to 15 percent. In the two years that followed, the Dow Jones rose from 8,000 to 10,400, directly increasing the value of all those 401(k)s. But Obama, along with the Democratic Congress, is poised to allow the 2003 tax cuts on dividends and capital gains to expire, thus risking a reduction in the value of all those 401(k)s. (The recent stock market collapse has Americans all that more focused on the size of their retirement accounts.)

Meanwhile, Joe the Plumber has focused attention on Obama’s plans to raise taxes on individuals earning more than $250,000 a year. This is no mere tax on the rich since many small businesses pay taxes at the individual rate. Obama’s camp says they will target only 2 percent of small businesses in a given year. Economists point out, however, that of the $700 billion in small-business earnings this year, $420 billion — or 60 percent — was generated by businesses earning more than $250,000. That’s a whole lot more than 2 percent.

Obama’s taxes also have a way of adding up. He has called for raising the top marginal tax rate on individuals and small businesses from 35 percent to 39.6 percent. Added to that will be a tax of 12.4 percent on Social Security, which is now capped at $102,000. This will create a top tax rate of 54.9 percent. (Self-employment profits also will face a 2.9 percent Medicare tax.) Adding in the average state income-tax rate, Obama’s top tax rate on small businesses and individuals climbs to about 60 percent. Compare that with Russia’s top tax rate of 13 percent, Hong Kong’s of 15 percent, France’s of 49.8 percent, and Sweden’s of 56.5 percent.
Thank G-d we have folks like Grover Norquist looking out for us. Let's hope the American voter have read Grover's piece or similar pieces on Obama's true tax policies.

*Also, check out Grover's wonderful book Leave Us Alone: Getting the Government's Hands Off Our Money, Our Guns, Our Lives

No comments: