Thursday, June 12, 2008

Tax Cuts for the Wealthy

Barack Obama and John McCain have both submitted their tax policy proposals and there is a very noticeable difference between the two. 

McCain appears to be vying for an average cut on taxes across the board, while Obama has proposed both cuts and increases depending on your income level. 
If a person earns less than $19,000 a year, under McCain you would receive a $19 tax cut. 
Under Obama you would have a $567 tax cut. Although we are working with relatively low numbers here, think about how much those low income families need that tax break. If you don't have a lot of money, $567 can make the difference in your ability to procure health insurance for your child. It can feed a family for a month or two. To many low income people it is a lot of money. 

On the other end, if a person earns more than $ 2.9 million a year, under McCain you would receive a $269,364 tax cut. Under Obama, your taxes would increase by $701,885.
The breaking point under Obama's plan is an earning of $227,000 or more. Everyone who earns less than that will get a tax cut, and everyone who earns more will get a tax increase. 

I believe Obama is on the right track here. He's giving poorer people a break and making wealthier people compensate, though I do confess the numbers seem extreme.
Remember, though, that only 0.1% of the population is in the $2.9 Million category. 

I believe that McCain is way off track. He is giving the largest tax cuts to the people who make the most money. This does nothing to boost the financial progress of the low and middle classes. I am not a fan of income tax in general, but if we do have to make people pay it, isn't it better that it comes from people that will still have enough money to feed their families and buy medicine regardless? 

Overall, both plans could potentially increase the national deficit. Over 10 years, Obama's plan would increase the deficit by up to $3.3 Trillion, while McCain's plan would increase it by up to $4.5 Trillion. Most tax changes don't stay in place permanently, though, and it takes time to implement them. 

I believe that if you are just thinking about the everyday lives of people, Obama's plan would have the greater positive impact on the most people. However, this does mean asking wealthier people to make financial concessions for the "greater good". There are certainly arguments for and against both plans. For now, though, I believe in the greater good so I will side with Barack Obama. 


3 comments:

thebaglady said...

I'm not sure of your income level, but I think Obama's plan is very deceptive and could hurt the lower and middle class.
1) He wants to increase corporate taxes. Research has shown that corporations usually just cut wages in response to tax cuts
2) He is mum on the Alternative Minimum Taxes. See my post about it here: http://baglady.dreamhosters.com/2008/06/24/what-about-the-alternative-minimum-tax-amt/
3) He wants to raise the capital gains tax. This could have an impact on everyone's portfolios if the more wealthy people decide to pull their money out of the stock market.
4) Obama also wants to waive taxes from seniors making $50k and below. However, this $50k amount won't be index for inflation so only current seniors will benefit. How is that fair to future generations?

Anyway, look a bit deeper before you side with "the greater good".

thebaglady said...

sorry, i meant, corporations cut wages in response to tax increases. Here's a good article about it:
http://blogs.law.harvard.edu/philg/2008/06/02/wile-e-coyote-tax-and-tariff-policy/

Redd Horrocks-Maier said...

Thanks for the comments, thebaglady.
I do greatly appreciate your point of view and I thank you for sharing it.
The Capital Gains Tax issue did concern me at first also, but then I did find out that he is planning to exclude a lot of fledgling companies from this increase, so new start ups would be cut a break. I appreciate the fact that he has thought about this and I believe that it is Obama's way of trying to encourage new companies and new growth.
Again, thanks for sharing your thoughts!