Posted on 06/22/2008 5:42:47 AM PDT by Diana in Wisconsin
(Candidates follow partisan playbook, with some twists)
Four years ago, John Kerry and George Bush launched their general election campaigns in Wisconsin by talking about jobs and the economy, pitting a Democratic message of fairness and change against a Republican message of tax cuts and trade.
If that sounds familiar, it should.
Because something very similar has happened in 2008.
Democrat Barack Obama's first visit since clinching the nomination came this month in Kaukauna, where he touted "middle class" tax cuts and bashed the Bush administration for rewarding wealth over work.
Republican John McCain's first visit as de facto nominee came in April in South Milwaukee, where he held an "economic summit" to talk up global trade and "pro-growth" tax relief.
Obama and McCain aren't economic clones of their parties' '04 nominees, and the political landscape has certainly changed since that race. Gas prices, a housing crisis and other woes have made the economy a far more dominant issue today.
But in some fundamental ways, the two '08 candidates are offering a reprise of the '04 debate.
Obama mixes tax cuts for the middle class with tax increases for the wealthiest. McCain backs an extension of all of the Bush tax cuts, plus cuts in the corporate tax rate.
McCain, as Bush did before him, contends that the keys to job growth include low barriers to trade and a low tax burden on businesses, investment and earners at all levels, including the very top ones.
Obama, as Kerry did before him, argues that it's time to ask people at the top to pay more, to spend more on social "investments" and infrastructure, and to target tax relief to those who need it most.
That priority gap makes for some very stark policy differences.
Take taxes.
McCain wants to extend all of the Bush tax cuts due to lapse in the next few years (tax cuts he once opposed), including those on income, capital gains, dividends and estates. Obama wants to extend the tax cuts that benefit people earning less than $250,000 but let the others expire.
The highest earners would take a big hit under the Obama plan. For people making more than $250,000, the top income tax rates would go up. The taxes they pay on capital gains and dividends also would go up (from 15% to somewhere between 20% and 28%). Obama is also proposing a higher estate tax than McCain.
At the same time, Obama is offering more targeted tax relief to people in the middle and lower brackets: a tax credit worth up to $500 per worker; no income taxes for seniors who make less than $50,000 a year; and a mortgage credit worth up to $800 for homeowners who don't itemize their taxes. McCain would double the tax exemption for dependents to $7,000.
Who wins, who loses?
Taken together, the Obama and McCain tax agendas would produce very different sets of winners and losers.
The nonpartisan Tax Policy Center concluded in a recent report that "Senator McCain's tax cuts would primarily benefit those with very high incomes."
The same report found that "in marked contrast, Senator Obama offers much larger tax breaks to low- and middle-income taxpayers, and would increase taxes on high-income taxpayers."
The Obama plan in 2009 would mean people with incomes of up to $18,981 - the bottom fifth of earners - would have an average of $567 more in their pockets after taxes than they do under the current system. Those in the middle fifth, earning from $37,596 to $66,354, would see their after-tax income grow an average of $1,042. But people in the top fifth, earning more than $111,646, would pay more in taxes; their after-tax income would shrink by an average $4,092.
And the McCain plan?
Households in the bottom fifth would see their after-tax income grow an average of $19, and those in the middle fifth would have an average $319 more in their pockets. But McCain would also provide tax cuts for higher earners: Those in the top fifth would pay an average of $6,264 less in taxes than they do now, and those in the top 1% of earners would see their after-tax bottom line grow more than $40,000 on average.
About 60% of households would owe less under the McCain plan than under current law, but most of those in the lower income brackets (the bottom 40%) would get no tax cut, according to the Tax Policy Center, a joint project of the Brookings Institution and the Urban Institute.
Corporate taxes
The differences extend to business taxes, as well.
A centerpiece of the McCain plan is a cut in the corporate tax rate from 35% to 25%. McCain also would allow business an immediate deduction on equipment costs (instead of having to spread it out over time), and he would make permanent a business research credit.
Obama says he would eliminate capital gains taxes for start-ups, and he said in a recent interview with The Wall Street Journal that he is open to a corporate tax cut, though he hasn't proposed one. He backs a windfall profits tax on oil companies.
The differences go on.
McCain says he would create an alternate, streamlined tax system with two rates and let taxpayers choose between that and the current system. The Arizona Republican backs a gas tax "holiday" for the summer. He would replace the current exclusion from income taxes that applies to the health insurance workers get from their employers with a refundable tax credit of $2,500 for singles and $5,000 for families.
Obama has proposed a short-term, $50 billion stimulus package. The Illinois Democrat offers a variety of long-term subsidies and tax breaks for health insurance, child care and college tuition. He also would expand the earned income tax credit for the working poor and would require that employers offer workers "automatic" 401(k) plans that they can pay into through payroll deductions. He'd raise the minimum wage.
All of the fine print raises a series of broader, interlocking questions that will largely shape the economic debate in this campaign.
Whose plan is "fairer"?
What's the impact on the deficit?
What's the impact on jobs and the economy?
The Obama campaign has cited the report by the Tax Policy Center to make the case that McCain's tax proposals are historically regressive.
"The McCain proposals are far more radical than what George Bush has proposed," Obama's economic policy director, Jason Furman, said in a recent interview. "It's a far more regressive tax agenda. . . . The gap between John McCain's tax policy and Barack Obama's tax policy may be the largest we've ever seen in an election."
McCain aides argue that the same report misses the bigger picture. They say that McCain's tax cuts on corporations, investment and the top income rates would produce the sort of economic growth that benefits people at all levels - and that Obama's tax increases on the top earners would hurt small businesses and the overall economy.
"By raising taxes on small businesses and keeping taxes high on corporations, (Obama) is driving jobs offshore. The burden of (his) proposals is going to fall on the workers of America," said McCain economic adviser Doug Holtz-Eakin of Obama's tax and trade agenda.
Back to the future
This broader debate, too, should be familiar to voters, who are used to hearing Democrats demand more progressive taxation and targeted tax cuts and Republicans saying such policies stifle growth. That's why the Tax Policy Center described the Obama-McCain plans as having a "back-to-the-future look to them."
On the deficit, the Tax Policy Center found more differences. On paper, McCain's tax plan by itself adds to the deficit because he reduces overall taxes. Obama's tax plan also adds to the deficit, although not quite as much as McCain's plan does.
Of course, that leaves out the spending side.
The candidates' spending proposals are harder to quantify. In some cases they are too vague; in other cases the price tags are disputed. Obama says McCain doesn't pay for his tax cuts. McCain says Obama doesn't pay for his new programs.
McCain says a big difference with Bush is that he'd be much tougher on spending. He vows to veto earmarks and proposes a one-year "pause" in discretionary spending outside of "essential military and veterans programs." (He hasn't offered a program of specific cuts.)
Obama says he'd save money by getting out of Iraq sooner, but he is also proposing more new domestic spending, including $150 billion over 10 years on energy technology, and billions more on infrastructure.
For states with large manufacturing sectors such as Wisconsin, trade figures heavily in the economic debate. Here again the rhetorical divide is large.
McCain says his support for expanded trade and his business-friendly tax policies will mean more jobs in the end and help states like Wisconsin that export manufactured goods. Obama is a critic of recent and pending trade deals.
Wisconsin's job numbers bear watching in this campaign, as they did in the last one. In the run-up to the '04 election, between May 2001 and May 2004, Wisconsin lost more than 60,000 manufacturing jobs. Since then, the state has lost an additional 10,600.
"This is a scarier time," John Karl Scholz, a visiting scholar at Brookings and a University of Wisconsin-Madison economist, says of the national economic landscape - jobs, deficits, housing, oil prices - in 2008 compared to 2004. "So it's going to make economic issues . . . way more salient to voters."
I manage to keep our "taxable income" down to a zero-sum game each year and we lack for nothing.
Get busy, because we're screwed either way, LOL! I've YET to see any "new" Government Program go away, once it has its hand in my pocket!
...
If the top 10% already pay 66% of the federal income tax receipts, why should they pay more? The lowest 40% pay no tax at all. Why not a flat tax of 17% on everyone and throw the Internal Revenue Code out the window? I've read the book on the Fair Tax and that's better than the current system, but the "prebate" part of the plan gives Congress a foot in the door to screw things up. (They'd respond to questions like: "It cost more to live in LA than Blankbutt, Arkansas, so I should get more from the prebate.")
As to minimum wage, every time they raise it, it is the young, inexperienced, unskilled worker who gets laid off...they very group they're trying to help. If you really think minimum wage increases help, then quit screwing around and raise it to $50/hour and be done with it. After all, the libs keep telling us there are no unemployment effects, so we're calling you out on your statistics.
A windfall profits tax? Really? Why is it less obscene for the money to go to Washington than to the oil companies? At least they produced something to get it. How does that tax help anyone but a politician? It does nothing to give me relief at the pumps and it give oil companies every reason to simply say: To hell with it, I'm taking my ball and going home.
Finally, if the Democrat party is the working man's salvation, how come, after 80 years of Democrat-inspired social legislation, the largest segment of their base is still poor? You'd think they'd catch on after a while that the Dems are selling them a bogus pipe dream. Alas, they're too dumb to see through the smoke and mirrors.
At best, Obama is an economic idiot.
Obama wants to give tax "breaks" to people who by and large don't pay income taxes. The source of the income for these transfer payments are the people who do pay taxes, and whom his proposals would tax more. He also wants to shift the burden of Social Security to high income earners.
But consider that "income" is not wealth, and that small businesses would be severely penalized under his scheme. Also, Social Security benefits are only based on earnings up to $102K, so Obama's plan would once again constitute a massive transfer payment from earners to non-earners, especially as the number of SSI recipients has increased, along with their average indexed benefit.
I’ll be enrolling in my employer’s medical plan soon and 401k and I might even be starting an IRA soon. Hopefully, that’ll lower my taxes enough to make a good difference. I’m not sure I qualify for any other tax deductions.
“He’d raise the minimum wage.”
There’s one mistake he’s making that most other people won’t understand.
“Obama wants to give tax “breaks” to people who by and large don’t pay income taxes.”
I do. So do my parents.
In closing I'm reminded of something my father said to me many years ago while I was growing up. He came home from a factory job that he worked for 44 years and said: “Son, there's only two groups of people in this country who truly have it made, the rich and the poor.” It's something that has stuck with me over the years and the longer I live the more this statement seems to be true. Middle class people really do bear the brunt of things. All of the things that middle class people struggle to obtain in their lives: a home to live in, food on the table, at this point heat and gasoline, or a college education for their children; all of these things are an afterthought to someone who is rich or poor for that matter. It's the person in the middle who has to expend the greatest amount of energy to obtain what I would consider life's necessities.
Not sure what you mean there. Everybody pays some taxes. Interest on a mortgage only gets you about a 25% reduction in taxes.
Some of the things I do:
Own a home
Own two small business from said home (many small enterprises apply)
Fully fund my employer-matching 401K each month (pre-tax dollars working for ME!)
Fully fund my health insurance “slush fund” each month at work (more pre-tax dollars working for me that pick up incidentals from prescriptions and other stuff not covered under our health insurance.)
I deduct every dime allowable. Itemizing is NOT hard if you stay organized with some sort of filing system throughout the year.
Donate to charity. You can take $500 right off the top with no receipts (though keep them!) unless any items donated are worth $250 or more in one chunk. (Clothing & household items to Goodwill, books to the library, $10 here and there to worthy causes, etc. All will give your receipts for you donations.)
And those are just off top of my head. :)
Of course, this works for us NOW (mid-40’s), but it might not when we’re 60+ and we’ll adjust accordingly.
One other thing that I bless my Dad for every day; he and I have all of his accounts owned jointly by he and I. Savings, checking, his investment accounts, etc. That way, when he passes on, it’s already mine; no Inheritance Taxes!
Of course, this only works if you have a totally trustworthy Daughter looking out for your best interests. ;)
There is no "try." Only "do." ~ Yoda :)
In his interview, he's asked about Obama's tax plans... From the interview:
Democratic nominee Barack Obama regularly professes disdain for the Bush tax cuts, suggesting that those growth-spurring measures may be scrapped. "If that happens," Mr. Mundell predicts, "the U.S. will go into a big recession, a nosedive."
One of the original "supply-side" economists, he has long preached the link between tax rates and economic growth. "It's a lethal thing to suddenly raise taxes," he explains. "This would be devastating to the world economy, to the United States, and it would be, I think, political suicide" in a general election.
Pretty strong stuff!
Exactly!
What I mean is that it’s RARE that I owe any more taxes than what the IRA Manual says I do.
Most times I’m NOT getting a refund, or a very insignificant one from both State & Federal, which means I am KEEPING the vast majority of my dollars, instead of giving Uncle Sam a tax-free LOAN with my dollars for the fiscal year. :)
Uh oh! Now you've done it! Admitting you work by the Irish Republican Army manual is going to raise some eyebrows.
Or, taxes take.
The article was interesting and informative but it omitted an important distinction between the liberal and conservative notion of a tax cut.
President Reagan and every President since Reagan have implemented Robert Mundell's economic policy. In simple terms, Reagan’s economic policy uses tax rates to either stimulate growth in the economy or slow inflation by slowing economic growth. Increasing tax rates slows growth and decreasing rates stimulates the economy.
The distinction is that the conservative believes the purpose of the tax cut is to stimulate growth in the economy whilst the liberal believes the purpose of a tax cut is welfare.
This became obvious to me when liberals insisted on calling President Bush’s tax cut a tax cut for only the rich. The top wage earners paid a higher percentage of the income taxes after the tax cut than before. However, the liberals talk in absolute dollars by pointing out that a high income earner received a larger dollar decrease in taxes than a middle class earner.
I have offered this explanation without success. Imagine that a high income earner and a middle class earner take a fishing trip together. They estimate their expenses for the trip to be $100. Based on the taxing system, the high income earner puts in $80 and the middle income earner puts in $20. After their return they discover they over estimated the expenses by $10.
Now here is the liberal dilemma. Should the middle income earner feel put upon if he only receives $2 of the remaining $10 while the high income earner receives $8?
I have used that analogy too. It doesn't matter to the liberal mind. All they see is 8 is more than 2.
Am I understanding this right? Odumbos plan would not raise the dividend tax for people making less then 250000 dollars.
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.