Obama’s Tax Proposals Beg the Question: Is He a Liar, or Just Ignorant?

Presidential candidate Sen. Barack Obama (D-IL) recently issued two bizarre proposals to amend the income tax code and Social Security program. These proposals seriously call into question Obama’s intellectual gravitas. To paraphrase Shakespeare – and Michael Stipe – Obama’s plans are but an idiot’s dream, already proven ineffective and disastrous to the U.S. economy, but nonetheless delivered with a sound and fury intended to impress his likely voter base.

Obama rolled out his income tax plans last week in a speech at the Tax Policy Center, an outfit whose policy is “We like taxes. A lot.” The Obama tax plan is chock full of what he calls “tax cuts” for the middle class, homeowners and the elderly.

First, Obama would “reward work” with a $500-per-person or $1,000-per-family personal exemption to offset a portion of their payroll taxes. The senator argues that 150 million Americans will benefit from this so-called tax cut.

Second, the plan would reclassify the itemized mortgage interest deduction as a universal tax credit available to every homeowner. Obama’s rationale is that the third of homeowners actually taking the mortgage interest deduction must necessarily be wealthy. The universal mortgage interest credit would pay 10 million homeowners approximately $500 each year.

Third, Obama says, “I’ll give retired folks the same kind of relief I’ll offer to working people.” The Obama plan would eliminate all income tax liability for about 7 million elderly retirees earning less than $50,000 a year.

Finally, Obama wants to simplify the tax filing process not by eliminating volumes from the tax code, but by having the federal government figure the tax liability for 40 million Americans who have a job, a bank account and take the standard deduction.

Obama concluded the outline of his new tax plan by declaring, “All of these proposals are about making America’s tax code simpler, and by making it work better for working Americans.”

I will set aside the easy arguments for why every American and the national economy benefits from low tax rates. A properly taught grade school child can grasp the process and outputs of supply-side economics. The important point to take from the Obama tax plan is that it offers absolutely zero real reductions in tax rates. Obama’s proposals are merely transfer payments renamed “tax credits,” sold to the gullible and the socialist with reams of class-baiting rhetoric.

It is an undisputable fact that the wealthiest Americans do not benefit from the current income tax code. Thirty-eight percent of all total U.S. households currently incur zero income tax liability, so a wealthy few are already paying the vast majority of income taxes. According to the Tax Foundation, the top half of all taxpayers, households making $47,500 and above, currently pay over 96 percent of the nation’s tax bill – and that number is growing. The number of households that pay no income taxes has increased 50 percent since 2000.

Obama’s plan does not simplify the tax code at all. It only shifts the tax burden to fewer and fewer Americans.

Obama’s plan to fix Social Security, like his tax code changes, is similarly devoid of either imagination or genuine ability to improve the program. As president, Obama would simply propose elimination of the payroll tax cap, subjecting all earnings to the already onerous payroll taxes. Of course, Obama will also fight efforts to “privatize” Social Security, since privatization “tears at the fabric of Social Security – the idea of mutual responsibility.”

In case you choose to not believe the annual Social Security Trustees reports, Obama feels your pain. He writes, “Some have argued that the problems are severe and that Social Security is fundamentally broken. This is an exaggeration. The underlying system is sound and the actual problem, a projected cash shortfall over the next 75 years, is relatively small and can be readily solved.” As anyone who can read knows, the projected cash shortfall begins in 2017, not 2082. In 2017 the Social Security Administration will pay out more in benefits that the Treasury will receive in payroll taxes.

The maladies Obama cited last week – an unfair, complex tax code and shortfalls in the Social Security program – are directly and irrefutably caused by his party’s policies. Democrats fight every attempt by conservatives to simplify the tax code by eliminating brackets or income taxes altogether. Liberals engage in social engineering by redistributing income through countless tax credits. Any attempt to alter the flawed Social Security scheme is characterized as hastening Armageddon.

Yet millions of voters, fantastically ignorant of history of the most basic of economic principles and devoid by their own choice of any formal educational training, will nonetheless cast ballots for this man, or John Edwards, or Hillary Clinton.

Barack Obama is either the most ignorant member of Congress or its most ardent liar. Neither character flaw is suited for the Oval Office.

I wish to confess. I’m not an economist. In fact, I have never had a formal course in economics. I am also not a mechanical engineer. My understanding of economics is based on common sense, which tells me that you cannot get more work out of a machine than the energy you put into it. (I believe that this is one of the postulates of thermodynamics.)

Supply siders say that reducing marginal tax rates will induce the average Joe to work harder, smarter and more efficiently resulting in a huge increase in economic activity which will produce more tax revenue than was lost through the tax decrease. Well, it didn’t happen during Reagan’s first term (you may recall that he said that the budget would be in balance by 1983) and it hasn’t happened during the reign of George W. Bush. Instead, our direct Treasury debt is approaching 10 trillion dollars.

Since the only true test of the validity of an economic theory is its real world results, supply side comes up short.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.