Sure, Barack Obama's associations are troubling and raise questions of his values, world view, judgment, character and honesty... and Bill Ayers isn't the half of it.
But for so many of us today, these issues are just so much "talking heads" noise. The American public is much more focused, in this day of financial turmoil, on "meat and potatoes" issues of the economy. And the health of Wall Street isn't as significant as the "Main Street" viewpoint of "what about my job, my healthcare, my TAXES?"
The discussion of taxes occupied a prominent portion of the final debate and "Joe the Plumber" has become a phenomenon!
Unfortunately, neither candidate clearly articulated their own or their opponent's tax policies clearly or concisely enough that the casual viewer could possibly extract a lucid understanding of how their policies would or could affect U.S. It then falls to analysts and commentators to distill it all down for public consumption.
So, here are some Tax Facts to bear in mind as you evaluate the candidates and their statements on taxes.
- Remember that there are scores of taxes imposed on the American people... not just the income tax. Your net buying power is affected by the sum total of them, and not just the income tax. So if you have your income tax reduced, but taxes on the goods and services you buy increase, you may see a net reduction in your purchasing power though you have more dollars in your pocket. Moreover, if tax policies result in higher prices, this is effectively a hidden tax as your purchasing power erodes.
- 30% of Americans have no income tax liability! They pay no income tax. When Obama offers "tax relief" to 95% of the people, 1/3 of those people will get "relief" in the form of a check when they paid nothing into the system! This is classic socialistic redistribution of wealth. Obama unwittingly revealed this intent in his "Joe the Plumber" conversation.
- Even if it were so that 95% could or would receive a tax cut, the top 1% of taxpayers (AGI over $364,657) earned approximately 21.2% of the nation's income (as defined by AGI), yet paid 39.4% of all federal income taxes. Yes, almost 40% of all income taxes are already paid by the top 1%. Based on these numbers, is further soaking the "rich" sustainable?
- Tax cuts for the rich? You are in the top 25% of income earners if you bring in more than $62,068 a year. (Bet you didn't know that means you're rich…) The top-earning 25 percent of taxpayers (AGI over $62,068) earned 67.5% of nation's income, but they paid more than four out of every five dollars collected by the federal income tax (86%). (source) This means that the bottom 75% of earners already bear only 14% of the burden despite earning almost 1/3 of all the income. Who needs tax relief? If you're in the top 25% at $62K, how low must your income be to be considered by some to be "middle class"? Low enough to be one of those not paying income taxes at all?
- Tax cuts don't reduce federal revenues; they stimulate economic growth which results in increased revenues to the federal government! It happens every time it's tried. Kennedy's tax cuts raised revenues. Reagan's tax cuts doubled revenues. Bush's tax cuts also increased revenues. (Spending is another issue entirely.)
- Tax breaks for corporations that send jobs overseas: The implication, of course, is that there is some policy, implemented or proposed, to reward companies for sending jobs abroad. There is not. A generalized policy toward tax relief on business in general (which would positively impact the economy as a whole) would be a tide that lifts all boats – including those who might outsource – but there is no concerted effort to inventivize shipping jobs offshore.
- On the other hand, there are dis-incentives in the tax code to bring overseas jobs back home. Removing these barriers has been painted as a "tax break" for companies who have overseas operations, even though doing so would bring these operations back home. Currently, the U.S. has the second highest tax rates on businesses in the world, something mentioned by John McCain during Wednesday’s debate. When a company has overseas operations, they pay the prevailing tax rate in the country of the operations. Here is the conundrum: Whatever the difference is between that overseas tax burden and our U.S. rates is required to be paid to the US, but is deferred as long as the operations remain overseas. Upon repatriating these operations back to the U.S., the cumulative difference is immediately due. Therefore, companies can avoid paying this accrued tax by remaining overseas. (These policies have been in place since long before George W. Bush, by the way.) If this barrier to returning home could be mitigated, many operations would be repatriated, creating domestic jobs and stimulating our economy. This could be accomplished by a moratorium on collecting the accrued difference, by allowing the accrued difference to be amortized over a number of years, or by removing the requirement to pay the difference at all. Furthermore, the current high corporate tax burden in the U.S. drives business overseas to pay the lower rates and defer the difference, so cutting the rate to a rate more competitive with the global market would keep more business at home in the first place.
- Corporations don't pay taxes! The fact is that corporations consider taxes part of their cost of doing business, and so they respond to increased taxes in one of two ways: they either increase the cost of the goods and services they provide (impacting their customer's buying power) or they reduce other costs by cutting jobs. When we say we will reduce taxes for the "middle class" and increase taxes on those earning over $250,000 (which are primarily small businesses who employ people), we will see higher prices – which reduces buying power and therefore hurts the "middle class."
Sadly, most Americans do not understand these facts, and are therefore easily swayed by eloquent "we're going to take care of you" speeches. Whenever a politician promises you a free goodie, please: ask “how?”
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