Taxes are always a sore issue with Americans. Hey, we started a revolution because of taxes. Our whole country is based on an aversion to taxation. Reasonable people can have reasonable disagreements about the role of government and taxation in the running of our country and its economy. However, the assertion that Barack Obama's tax plan somehow constitutes a danger to this country is an overly dramatic scare tactic and the post in which this claim is made overstates the reasons for and misstates the facts regarding the assertion.
First, the author attacks Obama's common sense: "As usual, the flowery rhetoric of Obama is completely lacking in any economic common sense." Leaving aside the clearly personal distain with which the author treats Obama's rhetoric, he attacks as "lacking in any economic sense" a tax plan that Obama claims is essentially the same tax structure that existed in the 1990s -- a decade that saw us return a budget surplus and a decade in which we saw economic expansion far exceeding that which has occurred under the current "trickle down", "no oversight" government management. So you ask yourself which makes more common sense: spending more than you take in, or balancing the need for enough income to offset your spending?
The author then proceeds to "put aside the fact that the tax increases proposed by Obama essentially constitute a substantial hike in the taxes on small businesses, since this has been very well covered." I would put this aside too if my best source for this inaccurate statement is the Grover Norquist article to which the post links. Norquist's article sources virtually nothing. I must confess, I was unable to even locate the IRS document to which he refers in making his point. However, real common sense should do the trick.
If you didn't bother to read the article, Norquist posits that "Obama’s plan to raise taxes on households making more than $250,000 will raise taxes on most small-business profits in America." The data I did find at IRS.gov does tend to support this statement. Norquist also rightly points out the tax rate increase Obama proposes would raise the top rate for those making over $250,000 from 35% to 39.6%. He further indicates that sole proprietorships and general partners (a two-person partnership) would face an increase from 37.9% (higher than other S corporations because of the need to pay Medicare in addition to income tax) to 50.3%. He doesn't provide any links or justification for this number, and it is not discussed in Obama's fact sheet for his tax plan (and if Norquist is right, who could blame him?)
Where Norquist jumps the tracks, however, is to equate Obama's plan with the plan some other Democrats have put forth (he claims) to extend the 50% rate to all S corporations. Norquist then goes on to paint a bleak picture of what life would be like in THAT instance. But of course, that ISN'T the tax plan Obama is advocating, so for either Norquist or AHOC's poster to act as though Obama is advocating such a dire plan is erroneous. For what it's worth, I tried to find out what percentage of S corporations sole proprietorships and partnerships comprise with no luck. Even without that information, it is difficult to envision a meltdown of the economy due to stifled small business when it is the small businesses that actually employ people that most impact the economy in general (at least among the small business subset we're discussing).
The author of the post in question then goes on to play on our misguided love of all things simple. He's a simple man, you see, so he's going to simplify the situation for us. And he does so quite effectively:
"I can't think of a single middle-class or low-income American who employs a a single worker. It is irrefutable that the responsibility of employing America's workers and creating new jobs is solely the station of those who control the companies, corporations and businesses that make up the U.S. economy. Raising taxes on high-income Americans can only have one effect, and that is to hurt job growth in an economy already struggling with rising unemployment."
The problem here is that we've simplified the facts right out of that statement. The author is now mixing up the discussion of corporate taxes with individual taxes. Individual income taxes on people who make more than $250,000 a year -- people who run these companies, corporations, and businesses, is not going to hurt job growth in the least. These people don't pay their employees out of their own pockets. We're talking about taxing these people's income, their pay.
Even when we get back to talking about small businesses whose owners pass through their business income to their personal income tax (a benefit that allows them to skirt additional income taxes for their employees that bigger C corporations have to pay), we're still talking about taxing the business owner's income after the employees have been paid. For most of these people, then, we're talking about the difference between taking home $65 per $100 of profit and taking home $60.30 per $100 of profit. I don't know anybody who would decide not to start or continue a business over a mere $4.70. Oh, and it isn't even that bad. The 39.7% tax rate only applies to profit over $250,000. The rates up to that point are less, and only the penultimate tier is also being raised (to 36% from 33%). The other brackets leading up to those that are being raised, are staying the same.
The author then proposes to attack the myth of corporate taxes, arguing that those additional costs to the business will be passed on to us. That argument makes a modicum of sense, to be sure. But it doesn't address the converse assumption that somehow a lesser tax rate is passed on to us. Do we really believe that if taxes were lowered, prices would somehow be lowered? Will there really be more wages? More benefits? More jobs? Or will it continue to be a matter of the rich getting richer? Hey, I don't have a problem with someone --even a rich someone -- making a buck, but let's not pretend that if we somehow lower taxes that the wealth will really trickle down. It never has, and it never will and for the very same reason you don't want to pay taxes in the first place -- you want to keep what you consider to be yours.
The author further contends (without attribution) that "Obama is advocating a tax plan that will raise the capital gains tax rate to as high as 28%." According to the fact sheet on Obama's web site,
"Families with incomes below $250,000 will continue to pay the capital gains rates that they pay today. For those in the top two income tax brackets – likewise adjusted to affect only families over $250,000 – Obama will create a new top capital gains rate of 20 percent. Obama’s 20% rate is equal is the lowest rate that existed in the 1990s and the rate that President Bush proposed in 2001. It is almost a third lower than the rate that President Reagan signed into law in 1986."
In short, the author's contention that Obama's tax plan is somehow dangerous to America is overstated at best, and flat out wrong at worst. Like Obama, don't like Obama. Vote for Obama, don't vote for Obama. I don't care. But you needn't fear that Obama's tax plan is somehow going to make your life any worse than it's been for the last eight years. I dare say, there is reason to think it just might get better.
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