Sen. Obama claims that, under his tax proposal, "95% of the households will get a tax break, and 5% of households will experience a tax increase." Sen. McCain has described it as a tax increase for 20% of the households. Obama's plan is centered around the idea that only households earning over $250,000 and individuals over $200,000 will pay more taxes (in taxable income, obviously, so a married couple could therefore earn about $280,000 if they were contributing the max to their 401k plan without paying higher taxes). Obviously, 20% of the households in the country do not make $280,000 annually. Is Obama mischaracterizing the thrust of his plan? Or is McCain overestimating the number of households that will have to pay higher taxes? Or is McCain adding in the effect of the proposed elimination of the cutoff of the social security portion of FICA? This has really been bugging me. Does anyone know the truth here?
Median household income is something like $45K. This means 1/2 of households make more than that. 22.6M households make more than $88K, and would be in the top 20% of all households. 5.7M households make over $157K, which is the top 5%. (figures for 2004) So if Obama taxes the top 5%, then any household making over $157K would be taxed, right? That's not the top 20% as McCain claims (I'm not sure this is his actual claim). One thing is sure, if Obama intends to spend on all the things he says, there's going to be a tax hike on everyone, and pretty substantial - 10% across the board hike would be required. http://ibdeditorial.com/IBDArticles.aspx?id=307666870183054 Middle-Class Warfare By INVESTOR'S BUSINESS DAILY | Posted Tuesday, September 30, 2008 4:20 PM PT Election '08: Barack Obama accuses John McCain of ignoring the concerns of middle-class Americans. But it's Obama who doesn't really give a hoot about them. After their debate, Obama told supporters in North Carolina that McCain "had a lot to say about me, but he didn't have anything to say about you." He noted that his Republican foe didn't mention the words "middle class" once during their debate, while he plugged the important group three whole times. In that panderfest, Obama vowed to "help" middle-class families, and make sure they get a "fair shake." He also pledged to get them "back on track," whatever that means. Truth is, Obama doesn't care about the middle class beyond its voting clout. In his first memoir, he denigrates "middleclassness" as "psychological entrapment" that "hypnotizes" people into thinking they're better than others. He agrees with his socialist reverend that its pursuit should be "disavowed," because it just separates people into classes of "we" and "they," instead of "us." As a community organizer in Chicago, Obama railed against suburban "white flight." He also frowned on blacks who left the crime-ridden streets of the inner city for the safer neighborhoods and better schools of the burbs. How dare they! So why does Obama pay homage to the middle class now? Presidential votes. He's using the middle class as a means to an end — the end being the power to enact his radical agenda. In this, he's following his hero Saul "The Red" Alinsky's playbook. Alinsky, the socialist street agitator who wrote "Rules for Radicals," detested the bourgeois "materialism" of the American middle class. But he advised his student radicals to court the middle class, even radicalize them when possible in favor of the cause. Don't be like 1960s revolutionaries who made fun of the bourgeoisie, he warned. Learn the language of the middle class; share their experience. "Start them easy," he said. "Don't scare them off." Alinsky revolutionaries don't flaunt their radicalism. They keep their hair trimmed and wear suits and ties. They're never outwardly rude. They don't use vulgar language in public. They show respect for authorities. Some even have mortgages and families. But don't be fooled. Obama is an elitist who skipped the middle class and went straight to his Georgian mansion. He doesn't share your values, but he wants you to share your earnings to pay for his radical social experiment. As McCain accurately argued during the debate, Obama this March voted for a Senate measure raising taxes on workers making $42,000 a year. So who's really on the side of the middle class?
this is what factcheck.org says, but I find their explanation lacking: Perhaps the difference is made up of those households that don't pay any tax right now?
For starters, FactCheck.org isn't non-partisan. I've never heard of "Urban-Brookings Tax Policy Center" so I looked them up and it's a joint project between the Urban Instistute and the Brookings Institute, both left-wing think tanks. Obama would raise the upper two tax brackets (of the six total), McCain would raise none of the tax brackets. Based upon this alone, anyone who makes $164,550 or more would see a tax hike under Obama's plan. TPC and Obama's advisors' claims of lower tax rates or dollar savings beyond this are based upon many tweaks to tax exemptions and credits. Whether those are enacted remains to be seen, and whether they will truly affect tax payers as expected (doubtful). Mccain's plan has similar kinds of tax exemptions and credits.
I used to work with a bunch of guys who went to the Urban Institute. They do lean to the left, but not outrageously so. My guess is McCain is adding in the future, unspecified FICA change. Which is completely fair because 1) FICA is certainly a major contributor to our taxes and 2) Obama's plan infers (without specifying them directly... so he limits the declared impact of the tax!) the projected revenues of that tax increase. It's essentially the same as the Bush tax cuts, which are ostensibly temporary and will "automatically" rise again in 2010 (conveniently after Bush is out of office). In both cases, the projection in the short-term is made more palatable by making duplicitous assumptions about what will happen in the future well beyond the control of the plan.
Here's a bit more on the Social Security tax and the methodology used by the Tax Policy Center. But here's the biggest problem with Obama's plan- it makes for big jumps in marginal tax rates tax rates, which will create disincentives for people to work.
