Obama’s tax cuts

From Obama’s 95% Illusion:It depends on what the meaning of ‘tax cut’ is:

Mr. Obama is proposing to create or expand no fewer than seven [tax] credits for individuals:

A $500 tax credit ($1,000 a couple) to “make work pay” that phases out at income of $75,000 for individuals and $150,000 per couple.
A $4,000 tax credit for college tuition.
A 10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).
A “savings” tax credit of 50% up to $1,000.
An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.
A child care credit of 50% up to $6,000 of expenses a year.
A “clean car” tax credit of up to $7,000 on the purchase of certain vehicles.

Here’s the political catch. All but the clean car credit would be “refundable,” which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer — a federal check — from taxpayers to nontaxpayers.

He also wants to remove the cap on Social Security withholding. Right now, once a person makes around $100,000, the Social Security withholding out of the paycheck stops. Whether payroll deductions that one never sees again constitute a tax is a matter of definition, though the money goes right into the federal stash since there isn’t a social security lockbox. One could make the case that this needs to happen to save Social Security. At any rate, contrary to Obama’s claims, this will amount to a big tax on a lot of people making less than $250,000.

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  • FW

    for sure obama is playing fast and loose with what he claims about his tax plans. mc cain wants to keep things the same as under bush, so his “plan ” is easier to assess, apart from what is is saying about his medical plans….. there is something seriously “fast and loose ” about bushes policies of the past 8 years, and mc cain wants to continue those, including the current nationalizations…….okayyyyyy….. pot meet kettle!

    somehow, neither side ads up. it seems that the republican plan is to slash taxes and in effect try to starve government, forcing them to cut back programs in the absence of tax revenue. This actually appeals to me. really. but we all know how that has worked out in practice under the republicans. We are heavily borrowing from the chinese (!) to finance a war that republicans argue about without mentioning the real constraints of american resources to continue. It is like republicans feel it would be unpatriotic or overly pessimistic to see that there are real and practical limits to american power and resources that need to be factored into what we want vs what is actually possible. I am not singling out republicans, I am merely stating that democrats could do no worse in one´s wildest imagination……

    so where does that leave us? we will need to be conservative and cut spending AND raise taxes to realistically balance the budget. since only about 18% of the federal budget is discretionary apart from ss/medicare and servicing the national debt, that means that whoever is in charge will need to touch ss/medicare and military spending.

    what is the realistic chance of that happening with democrats OR republicans???!!!

    so what are the REALISTIC choices here. I would be interested to hear something beside party rhetoric or abstract theorizing.

    I don´t know really what should be done.


  • WebMonk

    Go Libertarian with Bob Barr, or do a write-in for Ron Paul. Both of them have a VASTLY better comprehension of economics. Both are fairly typical Libertarians, with the standard faults, but even with those they are head and knees above either of the Rep or Dem candidates.

  • Matt C.

    There’s no realistic chance for Democrats or Republicans doing it this cycle. The first debate proved that when they were asked (three times) if the current financial crisis would change any of their plans. McCain bravely suggested cutting a few billion in pork before going on to suggest lower taxes by a much larger amount. Obama danced around the question saying a few nebulous “things” would have to be delayed but he would make sure he would get national health care, etc done. Oh, and he would lower taxes too, just not on the rich.

    Various third parties might theoretically do it, but they realistically won’t get elected.

    The only realistic option (which isn’t a choice) is that we’ll continue to borrow and spend until we’re bankrupt and our economy collapses the rest of the way. As far as choices go, I guess we can either choose to go along with the foolishness by voting Democrat or Republican or not go along with it by voting 3rd party or staying home.

  • Don S

    When the Republican Congress was able to institute welfare reform in 1996, with Clinton’s reluctant support, the “spread the wealth around” crowd had to come up with a different mechanism for welfare. That mechanism is “refundable” tax credits. These credits apply whether or not there is an offsetting tax liability. There is no difference between giving someone with no tax liability a “tax credit” and giving them a welfare check. In either case you are forcibly taking money from one American and handing it to another one. This is Obama’s plan as he so revealed it in his conversation with “Joe the Plumber”. His goal is to “spread the wealth around” because it is “good for all Americans”.

    Currently, approximately 30-40 % of all registered voters have no federal income tax liability. If Obama’s plans were all to be enacted, that would increase to nearly 50%.

    Question — is it good for America for one-half of all voters to pay no federal income taxes? What is their incentive to ensure that they vote for fiscally sound candidates? Why not vote for those who promise you a gravy train?

  • J

    Am I the only one that sees the McCain hypocrisy in criticizing Obama’s tax plan for “redistributing wealth” while at the same time proposing a mortgage relief plan that would take my tax dollars to pay down my neighbor’s mortgage who got in over his head?

  • Sam

    Don @4 – it’s comments like yours that persuaded me years ago to leave the GOP. You chide the poor for allegedly voting for candidates to keep their magnificent ‘gravy train’ intact while you’re seeking candidates to lower your own tax bill. Your self interest is responsible, theirs is just, well, selfish.

  • J, nope. You’re not alone. (maybe only two of us?) :^)

    I actually think it would be a good thing if more people didn’t pay income taxes–and if people were reminded of the tax bite for imported goods (yes we still do have some tariffs), gasoline, tobacco, alcohol, and other things many of us use every day.

  • Don S

    J @ 5: Of course it’s inconsistent, and I strongly disagree with this proposal. However, it is different in kind from Obama’s. The mortgage proposal is a one-time deal. Obama is proposing an ongoing structural change in our tax system.

  • Don S

    Sam @ 6: Why do I have trouble believing that you were ever in the GOP?

  • Anon

    Considering that Obama is repealing President Bush’s tax cuts, he is actually *raising* taxes on all taxpayers.

    And it won’t increase revenue. It never does. Tax would have to be MUCH lower to actually bring in less revenue.

    I personally prefer the idea of a sales tax, with exemptions for medicine, food and other essentials for life. No loopholes. Progressive if the rich don’t want to save up, and not hurting the poor.

    Those who think that there should be no benefits for the poor, are you willing to take up the slack through your congregations? Are you doing so now? Or are you just being Darwinian/Hegelian?

  • Anon

    My last paragraph was meant for reflection, not condemnation.

  • FW

    #10 anon

    a post of yours that I actually agree with completely. amazing eh?