
Obama Proposes Big Taxes
You might be asking yourself, “what will Obama do as president to change the economy and how will it affect me?” Barack Obama is going to raise your taxes, and he is going to raise them in a way we haven’t seen in a long long time. We have heard him on the campaign trail saying he will create a middle class tax cut for 95% of the population. A statistical impossibility since about 40% of the population does not currently pay income tax. If you read his tax plan from his website what he is actually planning on doing is adding about 15% more people to the group who do not have to pay taxes. He will also give a tax rebate to the 40% who do not pay an income tax. This is what he is calling a tax cut. This is not a tax cut. This is a hand out and would be better termed welfare.
Obama is unapologetic about his plan to raise taxes on the most wealthy. Many of these wealthy individuals are doctors, dentists, restaurant owners and other small business owners who were not born into wealth but worked their way up through education and hard work. They have realized the American dream and would now be punished under this tax plan.
An important fact to realize is that many small businesses file taxes as individuals so that they do not have pay taxes twice. The current tax rate for individuals and small businesses are in the 35% range. By rolling back tax cuts and then further increasing them Obama’s new tax rate on individuals and small businesses making more than 250,000 a year would go up to ~51%.
Now you might be saying to yourself, “that still sounds pretty good, 40% get some “free” money another 15% don’t have to pay income tax any more and it’s only the rich people who are paying and they can afford it. This doesn’t affect me.”
Well you are very very wrong.
While it is true that all of us would love to have a free check or hand out from the government to help us cope with the cost of gas, groceries etc this extra money will pale in comparison to the effects on all citizens in America. Here is an example of how taxing small businesses will directly affect the middle class:
Picture a business that brings in $500,000 annually in gross income. This is before taxes, before paying the employee’s incomes, before paying for the cost of the products they sell etc. Besides the owner, the company currently employs 3 people at $30,000 a year for a total $90,000 a year. The current tax rate of ~35% on taxable income (gross income minus salaries and overhead) costs the company $115,000. Assuming a 25% additional overhead at $125,000 a year the owner takes home an income of $185,000. ($500,000 – $90,000 – $125,000 – 100,000 = $185,000)
Now lets assume that Barack Obama is able to enact his tax plan raising the tax rate to 51%. This would raise the amount of taxes paid to the government to $145,000. When adding in the cost of employees and over head the owner now takes home $140,000! ($500,000 – $90,000 – $125,000 – $145,000 = $140,000) A 25% pay cut. This is assuming that the business could write off all 25% of their overhead which is currently not possible, so the pay cut would actually be higher than this. Could you afford a 25% pay cut in your income? If you could prevent this 25% loss in income, would you? What do you think is the natural and legitimate response to these tax increases? The owner would immediately fire at least one of her 3 employees. She would then raise prices on her goods so that she could earn more on each item sold. The owner would stop investing to grow the business and would stop charitable donations. Depending on the type of business the owner may also decide to use cheaper and less reliable materials in the products they sell. All of these reactions to the increased tax rate would occur throughout the country and would have a profound and far reaching effect on the economy. The people most affected would not be the owners (although they would suffer as well), it would be the workers, patrons and communities of these businesses, the majority of which come from the middle class.
Currently 75% of new jobs in America are found in the small businesses across the country. Imagine the profound effect that raising taxes would have on our already struggling economy. Jobs would be cut, prices on goods would be raised, and more and more businesses would be forced to lower standards or outsource overseas. Barack Obama himself mentioned he may want to wait a little bit to raise the taxes due to the economy, thus proving that even he knows his tax plan would only further punish the middle class.
The small amounts of money many American’s would get from the government ($500 a year is the equivalent of a 25 cent an hour raise) would not come close to the amount of money they would lose in the form of lost jobs, decreased wages, and increased prices on goods.
Fred Thompson may have put it best when he said, “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!
No one can afford Obama’s tax plan, especially those he says he is helping.
Great video on this theme can be seen here
More info:
http://www.politico.com/news/stories/0708/11670.html
Washington Times on this issue
Obamanomics
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