Under the plan, which he claims would cut taxes for 95% of Americans, provides an income tax credit worth 6.2% of earnings up to $8,000, for a maximum credit of $500 per worker or $1,000 per couple. The 6.2% figure is important, because it matches the employee share of the Social Security payroll tax. Because around a third of Americans currently pay no income taxes -- a fraction that would rise to almost half under Mr. Obama's plan, according to the Tax Policy Center -- Mr. Obama's tax credits would be refundable, meaning you could collect the credit even if you paid no income taxes.Of course, this is never spelled out in the debates and we just hear over and over that 95% of people would receive a tax cut. He's never pinned down about these proposals and what they would mean for Social Security, a system already facing looming problems.
While Mr. Obama calls his plan "Making Work Pay," under standard economic assumptions his plan would actually discourage work for anyone earning over $8,000 per year. The tax credit itself would increase workers' take-home pay, an "income effect" that reduces incentives to work. Moreover, for workers in the $75,000 to $85,000 income range, where the tax credit is phased out at five cents for each dollar of additional income, this would add five percentage points to their marginal tax rate.
So Mr. Obama has in essence proposed cutting Social Security taxes for low earners, which would shift the system toward a "welfare" approach and sharply increase its long-term deficit. To fill the funding gap, he will raise taxes on high earners and funnel the money into Social Security, making the system even more progressive and breaking a long tradition against funding Social Security with income taxes.
The complex way in which Mr. Obama structures and describes his plan would make it harder to administer than a straight payroll tax cut. But it is also more difficult for the typical American to understand. This may explain why he chose complexity over clarity.
Republicans have not been able to clearly explain what is going on so they accuse Obama of really planning to raise taxes on many more than that top 5%. They trot out Joe the Plumber and Obama's statement that he thinks we should spread the wealth around. And Obama comes back and claims that he's going to cut everyone's taxes and he gets away with it. But those proposals are going to affect not only our tax system, but also our Social Security system. And neither for the better.
6 comments:
"Obama's proposal to give tax "cuts" to 95% of workers. Since over 40% of people pay no taxes, he is saying that those people will be getting the tax credit on the payroll taxes that they pay for Social Security."
No, I don't believe that's accurate. Do you see the error? Obama's proposal is to give tax cuts to 95% of workers. Andrew Biggs then distorts that by talking about people who pay no taxes.
All workers are subject to taxes, even if only payroll tax, locals taxes and sales tax. All workers also pay social security contributions. So the group Andrew talks about are not part of the group Obama is talking about.
There is no free ride here. And you know what, even if they were, it would absolutely be worth it, if that's what it took to get our economy working again.
Anyone who truly beleves that the Democrat controlled congress and Obama won't raise their taxes is a fool. Taxes on buisness and capitol gains as well as the death tax will reduce the wealth of most of the moderately well off and middle class workers. It will also deplete the savings and investment income of most retired elderly people lucky enough to have a little more than just Social Security.
"America needs a president who understands the nature of the world we live in, a president who feels no need to apologize for the United States of America. We need a president who understands that you don't make citizens prosperous by making Washington richer and you don't lift an economic downturn by imposing one of the largest tax increases in American history.
Now, our opponents tell us not to worry about their tax increases. They tell you they're not going to tax your family.
No, they're just going to tax "businesses." So, unless you buy something from a business, like groceries or clothes or gasoline -- or unless you get a paycheck from a business, a big business or a small business, don't worry, it's not going to affect you!
They say they're not going to take any water out of your side of the bucket, just the other side of the bucket! That's their idea of tax reform."
Fred Thompson
Ou economy needs to be left alone. We've seen market fluctuations before, and we all know it's just a roller coaster ride. That's how the system works. But now, we have these illuminati socialists who plan to change it up, ad their own little modifications to the coaster. The only problem is that when you try to fix things that aren't broken, you might end up derailing the entire ride.
We don't need any more damage done to our social security...the economy is in enough trouble without Obama and his illuminati politicians screwing it up even more!
The people who don't pay taxes won't need to, because the socialist illuminati will take from us and spread it on to them.
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