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I'm a Minnesota Girl, living in the south. I tell my friends I try not to talk and think like a Yankee, but sometimes I slip up!

Thursday, October 23, 2008

Taxes, taxes Politics 2008

Perhaps, until the nomination of Sarah Palin and the unbelievably bad judgment that showed on McCain's part...the focus on ending the war in Iraq and the tax policies of the two campaigns were what had me leaning to Obama (Sarah was just the icing). I've expounded on the war, on Gitmo and on Sarah ad nauseum. What I've never discussed with others is the conclusions I drew from the 2 different tax policies.

Taxes ... Am I An Expert? Hardly.

A few musings on taxes... as an accountant with corporate tax responsibilities for 20 years, and as someone who spent a year in her own business, doing over 140+ tax returns and who will (sigh) probably go work for H & R block this year (My corp eliminated my incentive plan payout for 2009...due mostly to the economy. I understand why they did it, but I'll still miss that $$$, so, 2 jobs)... I'm frequently bothered by all the crap thrown around the elections about the two candidates' tax plans.

Up until the last month, I was kind of OK with it, because the differences were pretty clearly pointed out in the debates. And if you didn't know what to believe, there are plenty of websites that can spell out the differences in hard dollars. Use the websites that aren't connected to either party. But now a statement of "spread the wealth around", has generated so many tax lies, I feel compelled to speak. And since that remark and the Joe of the Plumber stuff, Obama's opponents keep saying he's going to raise taxes. He's not. He's going to cut them or keep the cuts that are already under the tax law for 95% of the population. He's going to raise them for 5% of the population. HE WILL NOT CUT CORPORATE TAXES. TO DO SO, WOULD BE A DISASTER.

The federal tax structure of this county has existed for decades. It consists of three parts: Payroll taxes to support Social Security, Payroll taxes to support medicare, and Income taxes to support everything else. By its simple existence, the tax structure "spreads the wealth around". People pay disproportionate amounts and all the $$$ to to the central coffers to support public programs and things like war. Corporations pay a flat rate. But really smooth corporations know how to pay NO taxes at all, based on things like the stock options they issue.



In 1993, with a house and senate Democratic majority, Bill Clinton pushed through a tax increase that not ONE Republican voted for. Gore broke the Senate tie. The primary focus of the Clinton plan was higher taxes for the wealthy. Headlines decried the plan ... it would be a "job killer", the deficit would explode, the stock market would crash. Newt Gingerich predicted disaster.

Clinton's plan raised taxes for everyone who made under $200,000 by an average of less than 1%. For those who made over $200,000, it increased taxes by 5.4%. If you made less than $20,000, your taxes were cut. (I hate to compare Obama to Clinton, but tax policy is similar... not much else is, thank God.)

The sky did not fall. Unemployment decreased and the budget was balanced by 1997. The annual deficit slowed down, and became a budget surplus in the last three years of office. (This entailed some spending cuts, as well)Still, the overall annual debt of the nation increased by the end of the Clinton era from $4.5 trillion to $5.9 trillion. You can compare this to the prior 8 years (last Reagan, older Bush term), where the debt mounted from $ 2 trillion to $4.5 trillion. Over the 8 years, Clinton grew 22 million jobs (237,000) a month.


Dubya was keen to make his mark immediately on the tax side when he took office. With his own majority, he proposed a tax cut almost immediately. It passed in 2001, a few months before 9/11. One of the hallmarks of his plan was that the tax cuts would be phased in between 2001 and 2010. So, some of the tax savings has occurred, and some is still to come. It included the repeal of Estate taxes in 2010, a tax cut clearly for the wealthier citizens, who had estates to leave to their children. Without considering the Estate tax cut:

In 2008, Dubya's 2001 act (it was somewhat modified in 2003) will cut taxes and revenues by $167 Billion, as follows:

Lowest 40% of incomes.... Save $14 Billion... These people make less than $25,800, Avg $18,000

Next 55% Middle class ... Save $71 Billion... These people make under $255,000, Avg $79,000

Top 5% income............... Save $82 Billion ...These people make over $255,000, Avg $483,000

Total reduction in income tax: $167 Billion

So, 5% of the people, get $82 Billion in tax savings, nearly 1/2 of the taxes saved. And the national debt and budget deficit grows.

It gets progressively worse... by 2010 Dubya's plan escalates the "savings", but not equally:

Lowest 40% of incomes.... $18 Billion... These people make avg $19,900 (less than $27,500)

Next 55% Middle Class..... $75 Billion... These people make avg $85,000, (under $281,000)

Top 5% income...........$137 Billion.... These people make over $281k, avg $535,000

Total reduction in income tax $234 Billion. These laws are already written. This will happen. As we spend $130 billion in the war in Iraq this year, we will cut revenues by $234 billion.

So, 5% of the people get 58.5% of the taxes saved. That does not include the savings on Estate taxes!!! And the national debt and budget deficit grows.

And, despite having saved all these wealthy people all this money, jobs grew miserably. Over his nearly 8 years, and compared to Clinton's 22 million jobs, Dubya's programs resulted in a total of 4.8 million jobs.


The McCain Tax plan recommends continuing the Bush tax program, boosting the individual exemption to $7,000 (more relief for larger families than singles, but the same at all levels of earning) , AND CUTTING CORPORATE TAXES FROM 35% TO 25%

THUS, in a single year, the calculation by most independent tax organizations is that it will raise the budget deficit by $535 billion dollars.

The Obama Tax plan recommends no taxes for seniors making less than $50k, an increase in the child tax credit to $3,000 (more relief for larger families than singles, but the same at all levels of earning). And:

The lowest 20% of incomes will get sizeable additional tax cuts. They won't get a payroll tax cut, so together, they will probably pay more like 10% instead of 17%.

The next 40% (up to about $75 k) will get small additional tax cuts in addition to retaining the Bush tax cut.

For people in the highest 15% of the middle class.... if you are over $75 k but under $150, you'll get a small cut. If you are between $150 and $250 k, it is tax neutral to you (you'll pay the as you would have under Bush).

If you make over $250k, you will pay 3% more (but if you own a small business, there will be tax credits if you provide healthcare). For these highly paid people, they will still be paying less tax than in the Clinton years.


In a single year, most independent tax organizations calculate that the Obama tax plan will reduce the budget deficit by over $600 billion a year. Without freezing spending, we won't realize the whole gain in a single year (the largest year Clinton ever had was $300 billion in surplus), but we will have made a start towards intelligent increases in revenue, so if we spend wisely and have spending redistribution (say, diverting $50 million in year 1 from the war in Iraq to education), without continuing to grow our national debt at an unchecked pace.


So, call it redistributing the wealth, call in anything you want. The only big home-based company in Tampa has a CEO who earns $2.6 million in salary and cash bonus (does not count perks or stock options) Under the Obama plan, he'll pay $78,000 more in income tax.

I, for one, think he can afford it, so we can fix our interstate system and our federal bridges.


National debt... ... 8 years of Reagan/Bush grew the debt by $2.5 trillion

8 years of Clinton grew the debt by $1.4 trillion (raise taxes on wealthy)

8 years of Dubya grew the debt by over $4 trillion (cut taxes on wealthy)

The first step in reducing the debt is to put the Obama tax plan in place... the debt should grow at a much slower pace, more akin to Clinton. If you put McCain' s plan in place (in the unlikely event, if elected, he could get his tax plan passed) the debt will continue to grow unchecked... especially until the 2010 expiration of the Bush tax cut.

Thank you, Dubya. I'm glad you saved all those wealthy people all that money and went deeply in debt to China.

Taxes.... it's not always about new ideas for the future, it's about curing bad things that former presidents did in the past.



Algernon said...

Socialism, ha.

See, you're bringing the science of accountancy to bear on a debate that has become essentially mythological, although Obama is gamely bringing numbers back into the frame.

Redlefty said...

Nicely done!