Largely from raising other taxes: the ones that have the biggest impact on economic growth. Obama would let key parts of the Bush tax cuts expire, causing the top tax rate on ordinary income to go back to 39.6 percent, up from 35 percent today. The capital gains and dividend tax rates would rise to 20 percent from today's 15 percent. Obama might also impose Social Security tax at a rate of up to 4 percent on wages and self-employment income above $250,000, starting in 2019.And let's not forget that these are the people most likely to find a way to adjust their finances to minimize their tax burden. There is no way he'll garner the sorts of revenues that he imagines will come from these tax increases. Such tax increases never get as much revenue as their advocates predict. Then add in the effect on the overall economy and you can see that Obama's economic tax and spending plans just don't add up. Perhaps that is why Chuck Schumer is suddenly saying not so fast on instituting such tax increases.
These tax increases are not as bad as some Obama statements during the Democratic primaries suggested they would be, and they fall well short of what some of his conservative critics claim. For example, Obama does not propose to tax dividends at 40 percent or to impose the full 12.4 percent Social Security tax on high earners.
His real proposals, however, would still be plenty damaging. If rewards for America's entrepreneurs and firms are reduced through higher marginal tax rates, their incentives to earn, invest and create jobs will be diminished. Americans will have less incentive to save, and firms will have less incentive to pay dividends. Tax avoidance will become more profitable. A smaller capital stock will mean a less productive economy and lower wages for middle-class and other workers. These disincentive effects also mean that the revenue gain is likely to be smaller than Obama envisions.
As the Wall Street Journal writes today, Joe Biden's words yesterday in saying that the tax cuts would start for those earning less than $150,000 not Obama's words that they'll start at $250,000 hide the truth that he'll never be able to pay for his promises with just taxing the top 5%.
We suspect what's going on here is more than Mr. Biden's normal gift of gaffe. As with his admission that a President Obama would quickly be tested by our enemies, the Delaware rambler was stumbling into the truth. An Obama Administration couldn't possibly pay for a tax cut for 95% of Americans by raising taxes on a mere 5%. Those 5% don't make enough money, or at least they won't after they find ways to shelter more of their income when their tax rates rise.
Just as Bill Clinton promised a "middle-class tax cut" in 1992 only to raise taxes on the middle class in 1993, Mr. Obama will quickly find that his tax-revenue math doesn't add up. Add in the demands on Capitol Hill to spend more and to offset the Alternative Minimum Tax, and our bet is that even $150,000 would soon prove to be a moving tax target. Remember when the AMT was only supposed to hit 21 millionaires? Next year, without relief, it could hit 26 million taxpayers. Tax increases always hit the middle class because that's where the money is.
10 comments:
Obama started defining the wealthy at an annual income of $1M. Then he dropped the number to $250K, then $200K. Biden now says the tax cuts will be below $150K. How low will they go?
If you live in New York, $150K family income is far from wealthy.
In ANY part of the USA, $150K annual income is damn wealthy, mister.
In the most recent year for which figures are available, 2007, the census bureau reported that median family income was $50,233.
A figure triple that makes you very wealthy indeed, and I hope President Obama does increase taxes there.
the same old story. i heard a lot in 1993 about the great depression of the 1990s that would surely be caused by the clinton tax increases. thoses poor millionaires are so sensitive, they'll just curl up and die if you increase their taxes. on the other hand, children of poor people, who apparantly made the wrong economic decisions when they chose their parents, can just suck it up
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Ten years ago, I saw a great cartoon about taxes. A couple are sitting at a table with the waiter standing beside them. The man is labeled "taxpayer" and with a disgruntled look on his face he is looking at the check.
The waiter, labeled "government", says, "It appears we have grossly overcharged you for your dinner. Would you like to know how we are going to spend the money?"
Nothing has changed.
$150,000 buys a lot more "living" in some states than it buys in, say, New York, New Jersey, Hawaii, Alaska or California, or depending on the size of one's family. Some 'need' to keep up with the Joneses; others are content without even a TV set. Essentially, you can't tell a book (family situation) by it's cover (income).
Betsy's post didn't say a thing about "...millionaires...curl[ing] up and d[ying]..." if their taxes went up. But common sense suggests bueiness operators are not going to "spread the wealth" any more than the rest of us would when they have the option of reducing the cost of operations. The owner of the Miami Dolphins has already announced his intent to sell the franchise to avoid paying increased capital gains taxes should Obama be elected. The wealthy aren't going to sit around and wait for socialism to swamp their boats. They'll take a hint from the Kennedys and get offshore, too.
It has been proven for at least the last 50 years, that a democrat in the White House leads to a much better economy.
Given that 8 years of GOP failed economic policies have led us to the brink of a new Great Depression, I'm happy to see the wealthiest pay a few % extra taxes. They have the most to gain from a Democratic boom economy.
Sounds like the owner of the Dolphins has about the same level of understanding of economics as Joe-the-unlicensed-$40K-a-year plumber.
SELLING the franchise will trigger the need to pay capital gains tax, not avoid it!
If he wants to AVOID cap gains, he needs to NOT sell it.
I am sure that the owner of the Dolphins has a few CPAs and tax attorneys to advise him on tax matters--and when it will be to his advantage to sell.
It was also reported that he said that he would rather give his money to charity than to Obama.
If so--good for him.
"jaw bone" must not have been alive, or was busy jaw-boning and not paying attention when Carter was in the White House, because all Jimmy's goodwill and "I can reason with the bad guys" platitudes (kinda sounds like "The One's" mantra) got a whole lot of hostages taken by Iran, interest rates reached 21% at the end of his administration, the term "stagflation" was coined (Financial Dictionary Definition: "Term coined by economists in the 1970s to describe the previously unprecedented combination of slow economic growth and high unemployment (stagnation) with rising prices (inflation)," and drivers sat for hours, sometimes, in lines waiting to buy 10 gallons of gas because of OPEC's policies. And Carter's "solution" was to speechify on national TV in his cardigan to blame the Americans for their "national malaise." It hardly seems even liberal voters believed a Democrat in the White House was worth all all those happy good times, for they promptly threw Carter out after a single term.
Huizenga has been in the process of selling off the Dolphins for awhile now. He wants to be rid of them eventually regardless who is elected. He will pay more if Obama happens to be elected. Only a fool would hold onto something knowing it will ultimately profit him less. Huizenga is no fool. A fool is someone who thinks politicians of either party will do anything to seriously damage the very class of people that donate the most to their campaign coffers. The Clintons found out that big fish in Little Rock didn't translate into bigger fish in the White House. And Obama won't get away with calling Pelosi, Reid, Kennedy, Dodd, Schumer, Frank and the other big Democrat players "racists" to get his way when they bump heads.
Time for some perspective folks. When I took my first job after earning my MS in 1971 (well within Jaw Bone's 50 year window) I was really excited about $9,230 annual salary I was going to start earning. Then in 1972 Jimmy Carter became president. The very first house I purchased during the Carter years had what was believed to be a really great interest rate---12%.
As for Bill, yes indeed $150,000 as annual income is 'damn wealthy' unless, of course, you happen to live on Long Island, which is much like any other part of suburan America, and you have to pay $1,200/month in property taxes for a 1,000 square foot house and you pay $.30 a gallon more for gasoline than the person who lives 30 miles away in NJ.
As for the tax on businesses and the notion that they can afford more taxes, your right. The reason they can afford is because they raise the price of their goods and services to compensate.
Finally, whether Mr. Wuerzelbacher is licensed or not is absolutley irrelavent to his question. I wonder if his question would have been more relevant if he did have a license. By the way, I thought that my grandfather in WWI and my father and uncles in WWII and Koreavand my friends in Vietnam, Iraq, and Afganistan have and are providing that license.
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