August 11, 2008
The Obama Tax Cut
Senator Obama deflects every criticism of his projected tax hikes with the claim that he is going to cut taxes on the middle class. On FOX News Sunday, Rick Davis was confronted with a non-partisan study that claimed Obama's plan would cut taxes for workers making $45,000 far more than Senator McCain's plan.
A graphic from a superb, must read in full, AEI article in the American Magazine gives a visual look at the Obama tax cut:
That's right, kids, if you're a one-eyed Venusion working part-time on odd Tuesdays in the service sector, have between two and three children and rent your home, the Senator is going to cut your taxes! Everybody else? Well, we all want to be fair don't we?
Governor George W Bush ran in 2000 against these wacky vertical lines in marginal tax rates. He called them "toll booths to the middle class." And he was right. The poor fool who qualifies for an Obama Tax Cut had better hope that he never gets a raise or that her spouse doesn't find a job -- they could be wiped out!
Although Obama is offering a new series of tax breaks, they undermine rather than improve economic incentives. First, whether or not you get those breaks will depend on your income. In Washington, taking away tax breaks as families work harder to make more money is called a “phase-out.” Economists have a different name for it—we call it a tax. Reducing a person’s tax credit as his income goes up also reduces his incentive to earn more income.
The supply-side mantra is to cut marginal rates. I cannot believe Professor Austan Goolsbee drank from the same water fountain as Milton Friedman and then signed off on this monstrosity. 2008 Posted by jk at August 11, 2008 12:50 PM
That's an incredibly insightful article, and it doesn't even get into the fact that Obama wants to lift the ~$100K cap on Social Security payroll taxes. So right at the point when a professional thinks he's starting to do well, bang, that's another 6.2%, plus reduced/lost raises and bonuses in the future, because the employer must somehow recoup its own "contribution" of 6.2%.
I don't know if your "one-eyed Venusion" example was based on Star Trek, but it got me thinking: Obama's tax plan is just like the absurdly complicated card game "fizzbin"! There may be certain points at which you'll want to give back not a card, but part of your salary back to your employer: if you make $y, you want to drop below $x, because below $x you can qualify for a tax credit that's greater than (y-x). And this really isn't far-fetched. It really doesn't take a lot nowadays for a couple to find themselves above $100K in household income, at which point .
My own personal example: I got a pretty nice bonus last year, significantly more than at the end of 2006. Well, 40% was withheld immediately, and though the remainder was still sizeable, I didn't get to keep a goddamn dime of it. That bonus and a raise for 2007, plus increased side employment, unexpected pushed me up into a higher tax bracket. I wound up owing more in taxes than I expected, which turned out to be just a little more than what was left of my main job's bonus! Had I known, it just wasn't worth giving up all that time -- that *marginal* time -- out of my life.
Liberals would say I should have planned better. My response is, "**** you, it's my money and I shouldn't have to spend a second to plan."
Posted by: Perry Eidelbus at August 11, 2008 2:15 PMI think most progressive-liberals would say not that you should have planned better but that you should think yourself lucky to have those income opportunities. Your response works equally well with either argument.
My favorite example to combat this nonsense remains Thomas Sowell's hard working taxi driver who works a double shift to earn more money. Okay, Dr. Sowell says, I see why we might tax his double wages at twice what he would earn working one shift, but why do we ask him to pay a higher rate?
Perry in '12 I guess (though I wonder how you will finance the war I wish to declare on Russia).
And actually, no, while I remember your Trek trivia on Eidelblog, I was never much of a Trekkie. The allusion there is a David Bromberg song with the line "I'd let my sister marry a one-eyed Venusian before I'd..."
Posted by: jk at August 11, 2008 3:18 PMIt's about time PE starting paying his "fair share." When you consider all of the government programs that it can fund, 100% isn't too much to ask, now is it?
Posted by: Boulder Refugee at August 11, 2008 3:48 PMTariffs and bonds were enough to finance the War of 1812, and poll taxes helped fund the Mexican-American War. And Don Luskin pointed out a while ago that lotteries were used for additional federal revenue.
What limited revenue does is prevent a government from going to war lightly. It also prevents it from using the central bank to create money to pay for wars, which has been happening for several centuries (ever since European powers discovered the power of fiat money). Now that's not happening today to the extent Ron Paul says, because our federal government borrows a lot from China that the Chinese received by selling products to American consumers.
Russia is doing what China could try against Taiwan in 15-20 years: retaking land it believes is part of the mother country, with the promise of so much blood that the U.S. won't have the stomach to intervene. Putin isn't really a Leninist, but make no mistake, he's this century's Stalin. With nuclear weapons. He's just the kind of man who will use them, damn any consequences.
What could work, if Americans want to help Georgia, is what my friend Billy Beck suggested: a brigade of volunteers. Or as I'll call them, mercenaries.
Posted by: Perry Eidelbus at August 12, 2008 9:57 AMTough choices in Georgia. Arms and mercenaries would be a good start. I don't know. Were the West (read US of A) to intervene, it would not be done on the cheap. I really don't care for any of the present options.
JG referenced our ongoing China debate. I always worried about China taking Taiwan until recently. I don't think it's 20 years out -- I think the idea is 20 years old. China would not risk the economic damage to her integrated economy.
Let's blame VP Gore. We had a chance to integrate Russia into the world economy but President Clinton -- and his special envoy, VP Gore -- squandered the opportunity.
I don't normally go back and blame Presidents but if today's left is going to blame hurricanes on President Bush, I'll point out that Gore allowed corruption and state influence to poison the 1990s well of economic freedom in the former USSR.
Posted by: jk at August 12, 2008 10:39 AM | What do you think? [5]