Sunday, October 12, 2008

Raise/Cut Taxes for the Rich/Poor?

Whose figures, McCain's or Obama's do you believe? It depends on how deep you examine what they are saying. If you believe the one-sided view presented in today's liberal Parade magazine you would believe Obama is the saviour of the poor and lower middle taxpayer. McCain would mostly cut taxes for the rich while Obama would cut taxes for the poor and middle class.

Let's look deeper. The top fifth of earners currently pay 67% of all federal taxes-not just income taxes, but payroll taxes, corporate taxes and death taxes. The top 1%of earners pay 26% of all federal taxes.

If the McCain proposal were passed, the top 5th would actually pay a greater share of the total of federal taxes and the top 1%'s share would decline by only 0.3%. High earners, despite what the media portrays would continue to carry the vast majority of federal taxes under McCain's plan.

Would any plan improve economic efficiency? Only if the plans reduce marginal tax rates--the amount of additional taxes paid for each additional dollar earned--which determine incentives to work, save and create jobs, facts that most media do not tell the average person.

The McCain plan would maintain current income tax rates and lower corporate taxes to help American businesses who ultimately provide American jobs and pay American wages and slow down outsourcing.

Obama's plan would increase marginal income tax rates on high earners and raise taxes on capital gains and dividends, the the effect of shrinking labor supply, reducing rewards for savings and increasing incentives to avoid taxes. All but the very lowest income Americans (many who do not pay income tax at all) would face higher marginal tax rates under the Obama plan.

Obama's recent television propaganda saying that $250,000 and below earners would pay no additional tax is an one third-truth, if not an outright lie.

We need to focus on the on the end product. How the presidential candidates' plans would change the tax code matters far less than where the tax code would stand when those changes are accomplished.

McCain's plan would also abolish the AMT currently slated to tax American people a trillion dollars in the next few years. Abolishing the AMT would save middle-class families an average of $2700 per year.

Obama plan by contrast would increase taxes on savers, investors, small business, employers, and other job creators and add more regulatory burdens.

Obama says he will restore economic growth. His plans would do the opposite.

More detail than my blog and research permits can be found by googling Jack Kemp, Peter Ferrara, Andrew W. Biggs and Kent Smetters, all very knowledgeable on tax and growth or tax and restraint of growth.

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