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A taxing situation
Posted by: McQ on Tuesday, July 01, 2008

The Heritage Foundation takes a look at what Obama promises for taxes should he be elected and what that means:
Obama’s tax plan has two major components. First, he promises to end the Bush tax cuts, allowing the top two tax rates to return to 36% and 39.6%. Second, he promises to end the Social Security payroll tax cap for incomes above $250,000. Individuals making more than $250,000, therefore, would face a 15.65% tax rate from payroll taxes in addition to a top income tax rate of 39.6% for a combined tax rate over 56%. Individuals living in cities or states with high taxes such as New York City or California would have tax rates approaching 70%, levels not seen since Jimmy Carter was in office.
This from a man who claims to want to ensure that he puts policies in place to help the economy. Instead, higher taxes, especially in the range being talked about here, have three effects.

One - tax avoidance. People effected by high taxes are going to try every legal means, such as tax shelters, to avoid paying taxes on their earnings.
These gimmicks both reduce investment and economic growth in an attempt to avoid punitive taxation. Some individuals will attempt to transfer their compensation from wages to capital gains since capital gains would only be taxed at 25%. Others might try to incorporate so they could pay business taxes instead of income taxes. All of these schemes divert resources away from wealth creation and to lawyers and accountants who implement these schemes.
Two - Income flight. Money and capital will be moved to overseas location where it is taxed at a much lower rate.
Visiting Britain recently, French President Nicols Sarkozy remarked that France’s high taxes had driven so many French to London that it had become the seventh-largest French city. Obama-sized tax rates would drive many creative Americans to Canada and London as well.
Or Ireland. Capital is going to seek a friendly tax climate for investment.

Three - Unemployment. When investment slows, the economy slows. And when the economy slows, the fastest way to effect the bottom line is to reduce headcount.
Currently only six of the top 30 industrial nations have combined local and national tax rates above 55%. The average unemployment rate rate for those countries is 7.35%. Under Obama’s plan, the top marginal tax rate would exceed 60%, which means only Hungary would have a more punitive tax rate. Hungary’s 2006 unemployment rate was 7.5%.
Couple that plan with the Obama plan to impose "windfall taxes" on the oil companies (for which the consumer will pay at the pump), biofuel mandates (for which the consumer will pay higher food prices) and and a carbon tax (for which the consumer will pay as well) and you have all the makings of an economic disaster.
 
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It’s 1929 all over again, with Bush playing the hapless "Great Engineer" Hoover, as Bush has either been ineffectual (Social Security reform) or dangerous (Medicare Drug Act of 2003). Come to think of it, the Dems are pushing trade wars (no vote on Columbia per Ms. Pelosi) and ruinous taxation (if any of what Obama proposes comes to pass, from letting Bush’s tax cuts expire to raising corporate taxes to idiotic "windfall" taxes on oil companies to raising Social Security taxes on the "rich") plus, of course, no end of new government spending schemes...

We are plainly screwed. Obama will end up finishing us off with FDR-like programs that ended up prolonging and worsening the Great Depression.

Do we have any Senators or Reps that have half a brain?
 
Written By: Maurice Sonnenwirth
URL: http://
Yes, at most.

 
Written By: Jeff Medcalf
URL: http://www.caerdroia.org/blog
"Do we have any Senators or Reps that have half a brain?"

Reporter: Governor, these people are dummies!

Governor: [whispering] I knew that, how do you think I got elected?
 
Written By: CR
URL: http://
Couple that plan with the Obama plan to impose "windfall taxes" on the oil companies (for which the consumer will pay at the pump), biofuel mandates (for which the consumer will pay higher food prices) and and a carbon tax (for which the consumer will pay as well) and you have all the makings of an economic disaster.
But hey, so what if we’re in an economic disaster, Republicans can only get a bounce from Obama and the Democrats failing.

Yeah, and we aren’t still living with the policies enacted after the last major economic disaster (aka the Great Depression.)
 
Written By: Keith_Indy
URL: http://asecondhandconjecture.com
"so what if we’re in an economic disaster"

I see where you’re trying to go with this and I am not at all sure I disagree. Still something about that statement gnaws at me in an "Other than that, Mrs. Kennedy, how was Dallas?" kind of way.
 
Written By: CR
URL: http://
If unemployment increases to 7.5% (or higher) due to President Obama’s economic policies, he and his fellow Democrats will blame it on the Republicans.

And always remember this: the justification for assigning blame to any particular party need not be logical in order to be successful; it need only be succinct and "catchy", and therefore worthy of repeating over and over. Therefore, blaming Republicans is very likely to be successful. Remember also that the MSM has a vested interest in their champion, and will repeat whatever memes come out of the DNC.

This is why conservatives who boycott the election will gain nothing. They will not only get bad policy from Obama as chief executive, but they will get blamed for the failures of said policy to boot.

In my view, a better strategy for conservatives is to vote for the Republican nominee. The likelihood is higher that at least part of your agenda will be passed.

—-John Johnson
 
Written By: John Johnson
URL: http://
If Obama wins, I expect to see a whole lotta capital realization.

What that means is that there will be a spike in capital gains tax, at the old 15% rate, so that they don’t have to pay the expected new 25% rate.

The process of capital realization will require that the stock or asset be sold (and quite possibly re-bought), so expect a wild stock market till the end of the year, if Obama wins.

In the short term there will be this spike in tax revenues, but after that a void big enough to put the moon into.
 
Written By: Neo
URL: http://
I see where you’re trying to go with this and I am not at all sure I disagree. Still something about that statement gnaws at me in an "Other than that, Mrs. Kennedy, how was Dallas?" kind of way.
And yet, there are still people who want to see things go that way. I’m not one of them.
 
Written By: Keith_Indy
URL: http://asecondhandconjecture.com
I really hate to be picky but "effect" and "affect" are not interchangeable.
 
Written By: Paul
URL: http://

 
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