An Excellent Overview of Obama and McCain Tax Proposals

Good job, Mark. Yes, Social Security and Medicare matter, and neither candidate has a plan that will establish solvency for either of these programs. (Obama's "solution" that boosts Social Security taxes for those above $250K annually only delays the onset of deficits by maybe five years, if that. It is no solution at all.) And it is true that the current bailout (Wall Street bailout plan, a. k. a. 'rescue," even though the initial word from Treasury now on details of the "rescue" is that "healthy" banks will also be the object of federal investment)

http://www.bloomberg.com/apps/news?pid=20601103...

will force Obama to reduce spending on his pet projects after he likely takes office next year.

A critique of Obama's plans is here.

http://online.wsj.com/article/SB122385651698727...

Mark,

When you ask if it's fair for the rich to pay a higher percentage are you questioning the concept of progressive taxation in light of the massive and growing disparity in income between the very wealthy in this country and the middle and lower economic classes?

The wealthy do not (and as far as I can tell) will not pay under the Obama plan a higher percentage than anyone else. Right now many rich people pay 15% while others pay double that percentage (or more). I have not seen anything about Obama's plan which would increase the percentage for the rich so drastically.

Jim,

What should the government punish people with long planning horizons such as doctors who worked for years to make good money to reward people who are lousy planning horizons? Why is the party that taxes cigarettes to get people to stop smoking want to tax employment and reward unemployment?

no sale, SD. We have rewarded investing as superior to working, on the now obviously failed concept that investors would increase jobs and build factories. I think most Americans would agree (and ahem, this is supposed to be a democracy) that workers should not be penalized while investors are coddled. Let those who earn over a certain amount from investments pay EXACTLY the same % as those who make the same amount working for a living. Well? Working voters? What do you say? Do you see any more advantage in penalizing work to coddle Wall Street? How's that working out for you?

Oh, and I don't mean to leave investors out of the question. I'm one myself. So, investors? Don't want to pay the same in capital gains that a worker would pay on the same salary? Well, GET A JOB if you don't like the math.

GreenDreams,

Investing is a long term process. If you want, move capital gains from one year to two years, if you want to punish Wall Street. However, the day traders are paying the same as working people because both are operating in the same time frame.

Why punish people who save for their children's education or their retirement by taxing their savings at a high rate while rewarding consumption with higher government benefits? If you reward investing, then income earners will become savers. If you punish savings, you encourage pointless consumption.

SD, we can both talk about "punishing". You talk about "punishing" investors, but condone "punishing" workers. How about some fundamental fairness. Time for investors to awaken to the fact that companies need customers. The staggering wealth gap in the US does not serve either investors nor workers. Middle class and lower income Americans need spendable income for investors to make out. We've tried the approach of shifting wealth upward. It's a crashing failure. Let's even it out a bit and put money in the pockets of people who need to spend it. That's what drives the economy. And pushing investment has NOT encouraged saving. Our savings rate is worse than ever. It's negative right now. Calling the same old plays and expecting a different result is a famously bad policy.

DLS and JS:
Please notice that I was quoting an article from the Columbus Dispatch. The questions weren't mine, but those of the author of the article.

Mark Daniels

Mark -- I was aware of the original source of the remarks to which I responded. You did a good job in making them available and once again bringing to people's attention that Social Security and Medicare are unsustainable in their current form (though at least in the case of Social Security, the "current form" could be retained; it just would require more additional revenue than Obama's plan would provide it, to become solvent and thus sustainable). Someone else said it, but in making it available you deserve credit for it, in other words.

I have used the Trustees' Report summary before in advocating a Social Security payroll tax increase that would solve the problem with that program. Just raise the tax as high as it needs to be, or slightly higher just to be more secure about the program's future, and be done with it, is the easiest decision.

(" Social Security could be brought into actuarial balance over the next 75 years in various ways, including an immediate increase of 14 percent in payroll tax revenues (from 12.4 percent to 14.1 percent) or an immediate reduction in benefits of 12 percent or some combination of the two. Ensuring that the system is solvent on a sustainable basis beyond the next 75 years would require larger changes ..." Just increase the payroll tax from 12.4 per cent to 15 or 16 per cent and be done with it.)

As to the greater debate in the comment section of this thread, the punitive nature of progressive taxation, which in fact is unjust and only has in its favor a utilitarian argument (those who fail to grasp the essentials here would remain ignorant or less than honest if asked if it would be okay to make the price of anything and everything based on one's income): Sensible people would insist on a single rate (the "flat" income tax) with all income (yes, including dividends and such) subject to the tax, and would be preoccupied with insisting on an individual universal exemption that is at a high enough level to realistically protect from taxes income sufficient to meet one's basic needs. (Better still would be to abolish the income tax, but we can't hope for the best at this time, I realize. Also related to this would be to abolish the exemption of government bond payments to holders from taxation, forcing interest rates of government debt to increase to closer to market levels, an end to "cheating," in other words, but that is too much to expect, especially at a time where more debt by governments in this country is likely.) Place all income under the tax, at the same rate, and provide a contemporary, real-world-level individual exemption. Let any arguments be about spousal or dependent exemption and child exemptions, or if the tax should only apply to households rather than to individuals.

The result of Obama's Social Security plan can be seen here. Note that as with Social Security now, any descent below the zero line represents revenue that will have to be raised from scratch, from new taxes, money redirected to Social Security from other spending commitments, or borrowed. This is the problem with Social Security now, that is not solved by Obama's plan, just delayed a few years by it.

http://www.ncpa.org/pub/ba/ba470/images/fig1.jpg

If you want to see more, take a look here. Note that not any of the ideas given (which includes raising the income cap, both with and without adjusting benefits) will solve the problem. Note that in each case, in little more than twenty years or so, deficits begin. Deficits must be prevented in order for any "solution" truly to be a solution.

www.ssab.gov/financing/2004_update.pdf


I have provided nothing about the effects of McCain's plan because frankly, it is a bizarre plan, and I don't know if it's really possible to find anything that can state with determination just what the effects of McCain's plan will be. Obama's plan is nothing new, and has long been understood by many (raise or eliminate the cap, with or without adjusting benefits for those affected by the change in the payroll tax effect).

IMO it is a rather bizarre idea, at this difficult time, to change Social Security to forestall a problem 75 years out. We have no realistic way of predicting the social or economic situation that far out. Within that time, I would hope humanity reaches a point at which we can cut 70% of our military expense. Problem solved.

DLS, I don't have a problem with flat tax if it can be made to work for all, rather than continuing the burgeoning wealth gap. But I have no problem with progressive taxation either. The wealthy are, and always have been, in a better position to profit from the opportunities that America provides. They can afford to pay more, and should, for the sake of America. We don't have to be ruled by unbridled greed and selfishness. How about a little real patriotism?