Obama's Tax Plans

Bill Clinton was a growth Democrat. So he won twice. But Obama is aligning himself with the Democratic losers. And that will make him a loser as well.

Obama says his proposed tax plan would give families making between about $38,000 and $66,000 a year an average tax cut of $1,042. The savings for families making between $66,000 and $112,000 a year would be $1,290 (compared to $1,009 under McCain's plan). With respect to the 0.1 percent of taxpayers with incomes of more than $2.9 million a year, Obama would have them pay at least $702,000 more than they currently do.

In addition to letting the Bush tax cuts expire, Obama also advocates increasing the income cap on payroll taxes. This would essentially be a huge tax increase for taxpayers earning between $97,000 and $250,000, which goes against Obama’s prior commitment to not raise taxes on individuals making less than $250,000. Although higher taxes on the rich is a popular thought for many liberals, you cannot expect to only tax the rich and cut taxes for the poor. The American public is not likely to support unbalanced tax increases and this could harm his chances in the general election. The cap on wages subject to the payroll tax is presently $102,000. By eliminating that cap Obama will be soaking veteran firemen, cops, teachers, and health-service workers, along with a variety of other occupations.

Obama’s desire to increase the Capital Gains rate is probably the biggest actual increase of his tax plan. The current tax rate on Capital Gains is 15%, and Obama hopes to raise it to 28%. Although the Capital Gains tax rate is much lower today than it was a decade ago, it is being levied on a lot more people. Investing is not only for the rich, as there are millions of middle income Americans investing in stocks, retirement accounts, and mutual funds. In a time of a looming economic recession, we should be encouraging sound investment and savings strategies. Raising the capital gains rate is not going to do that. The Wall Street Journal’s Steve Moore points out that in 2005, almost half of all tax returns reporting capital gains came from households with incomes under $50,000, while more than three-quarters came from households earning less than $100,000.

To have place this in perspective:
According to the IRS, the top 5 percent of wage earners pay almost 60 percent of the income tax. Conversely, the bottom half of wage earners are paying less than 4 percent.

Read the Tax Policy Center's report on both candidate's tax plans here.