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
October 13, 2008 at 5:56 pm |
Thanks for an insightful post. However, what could be an alternative source of tax? And, if citizens are not taxed, how the Nation will pay off the debts?
October 13, 2008 at 11:19 pm |
Since Bush cut taxes back in 2005 the government has seen about a 20% increase in tax revenues. This seems counter intuitive but when taxes are low, businesses invest, grow, etc and much of this growth is taxed. The problem with Bush is that he spends like a typical liberal. Yes there is the war to fund but he spends in many places besides that.
Keep taxes low, encourage businesses and especially small businesses (where most middle class Americans are employed) to grow and cut all the ridiculous wasteful spending. Even Clinton spent about 6% less than Bush!
One thing I am certain of is that if Obama is able to enact all of his spending and tax increases simultaneously it would stop any recovery our economy will have.
October 21, 2008 at 11:49 pm |
You did a great job breaking this down. Many do not realize what an Obama presidency means to us economically. My son has been looking for a job for two months. Two months ago, the phone was ringing at least once in a while. Since the bailout it has stopped. He’s been going to job fairs, etc. and even that has slowed down.
America can not afford an Obama presidency. Obama talks of tax cuts. There are no tax cuts. He will do what Democrats have always done, RAISE TAXES.
October 28, 2008 at 4:17 pm |
Why did it take “Joe the Plumber” to expose Barrack Obama’s tax “fairness” plan? Obama exposed himself long ago and I cannot figure out why no one has talked about it before “Joe the Plumber.”
During the Democrat debate in Philadelphia April 16, 2008, Charlie Gibson challenged Obama on his plan to raise capital gains – he said history proves it does not raise revenues from this tax.* Obama’s response? He admitted to Charlie Gibson raising the capital gains tax was not about raising revenue, it was about “fairness.” (This was well detailed and chronicled by Dick Morris in the first chapter of his new book, “Fleeced.”)
During Obama’s interview with Bill O’Reilly, he said, “People like you and I who can afford it, need to ‘help’ the waitress or others who don’t have as much.”
And let’s not forget Senator Biden’s comment about paying more being “patriotic.”
Republicans should have been hammering Obama on his socialist tax policy plans long before “Joe the Plumber” came along. Republicans should have been using the “S” word a long time ago!
*In the last 27 years capital gains tax rates have been cut three times, 1981, 1997, and 2003. Each time capital gains tax rates have been cut revenues from this tax increased over the subsequent three years, 49, 49 and 88% respectively. On the other side, in 1986 capital gains taxes were increases and revenues from this tax DECREASED over the subsequent three years 44%.
April 15, 2009 at 5:00 pm |
The style of writing is quite familiar to me. Have you written guest posts for other blogs?
May 15, 2009 at 3:57 pm |
I haven’t actually
August 5, 2009 at 10:53 pm |
thank you for this informative post it has better helped me to understand the true tax plan. and as much as we are here to take care of each other that doesn’t mean we have to mandatorily do it through taxes, what happened to free will… I think it’s almost gone what will obama take next.