Seppanen 1 Lynn Seppanen Professor DeGenaro Composition 105 25 September 2008 The Obama Tax Plan The monumental government bailout on the horizon has prompted millions of Americans to ask in unison this question: “How will my taxes be affected?” If these events were to happen in the not so distant past we might look to President Bush for an answer, but since he will not be in the oval office for much longer the answer we seek lies with our presidential candidates Barack Obama, and John McCain. Unfortunately, extracting an honest response from a politician (especially on running for president) is not an easy task. The answer given will be obscured by campaign rhetoric and perhaps even blatant lies. It is the duty of every voter that wishes to be effective to analyze information about the issues, instead of trusting campaigns will be objective in their answers. There are several key components of Barack Obama’s tax plan according to www.barackobama.com. For now, we will focus on working individuals rather than businesses. Perhaps the most prominent and widely known aspect of his plan is the tax cut for 95% of working Americans. Along with that, he will grant a $500 tax credit per person or $1,000 per family for 150 million American workers. This will eliminate federal income taxes for 10 million American workers with the lowest incomes. Seniors who make less than $50,000 will have their federal income taxes completely eliminated. The only individuals who will be seeing an increase in federal taxed are those who make
Seppanen 2 over $250,000 yearly (“Economy”). After further investigation into the tax plan, some holes will become apparent. As for the tax credit, it has stirred a small amount of controversy. According to The Wall Street Journal, the tax credits, “…would mostly go to those who pay little or nothing in federal income taxes…If the taxpayer pays nothing in federal income taxes, the government would pay him the whole $1,000” (Ferrara).There are many skeptics of the Obama tax plan calling this another new form of Welfare. Logic raises a question. What entitles a person not paying federal income taxes to a federal income tax credit? On the elimination of income tax for seniors, we can easily infer that this is aspect of the plan simply a tactic to gain the vote of the elderly, who historically vote in record numbers. In the CIA world factbook, it is stated that GDP per capita is $45,800 (“World Factbook- United States”). Why then, would these seniors making above or close to that amount need to see their federal taxes go away? This new idea will have a large impact on the income collected from federal taxes. Right now, 12.7% of the population is 65 years of age or over (“World Factbook- United States”), and as it is widely known that number is rapidly increasing as the Baby Boomer generation gets older. Most of this large chunk of the population will be excluded from federal taxes, adding to the tax burden for other people. It should also be noted that the vast majority of seniors already have Medicare and receive checks from Social Security. How are seniors in need of tax exemption when these programs are paying for them? It is clear that those making $50,000 yearly do not need it at all. Obama’s tax plan for businesses looks ideal at a glance. He plans on being generous to small businesses and crack down on those big companies who have been judged as too greedy. He will put a Windfall Profits Tax on oil companies that earn said
Seppanen 3 profits, and bestow a yearly $1,000 Emergency Energy Rebate to middle class families with the money gained from the tax. Tax breaks for companies who send jobs overseas will be eliminated, and companies who keep good American jobs will be rewarded in the form of tax credits. New small businesses will be relieved of the capital gains tax burden (“Barack Obama and”). When looking at the Windfall Profits Tax, it seems like a perfect solution at first, but further analysis will reveal a few flaws. First off, who decides when profit becomes windfall profit? Nothing can accurately indicate when that is happening. Who knows if we are being unfair to the oil companies? Will this not affect the middle class workers whom Obama claims to fight tooth and nail for? If dependence on foreign oil is a major problem in America today, why would we want additional taxes on domestic oil? If there is a limit put on the amount of money an oil company can price a barrel of oil without being taxed extra, it could be very damaging to our domestic oil companies. This scenario is awfully reminiscent to what happened in the 1970’s under President Jimmy Carter, who put a cap on how much gasoline could be priced at, and as a result, shortages and gas lines plagued the nation. In his speech at the Democratic National Convention, Obama told the people of Denver (and the people of the world) that he could pay for all of his tax cuts and new programs. Among his new programs is the massive undertaking of establishing Universal Healthcare in America. With all his proposed tax cuts and other programs other tan that, it is seems highly improbable that his proclamation is true. In fact, it is not true at all. He told the people: “Now, many of these plans will cost money, which is why I’ve laid out how I’ll pay for every dime – by closing corporate loopholes and tax havens that don’t help America grow” (“FactChecking Obama”). Obama’s campaign estimated that the tax
Seppanen 4 cuts will cost an annual $130 billion, not to mention the new programs. At a separate time they estimated the money derived from loophole-closing will total at $80 billion (“FactChecking Obama”) That is just not gong to work out. On a 60 minutes interview on Sunday, September 21, Barack Obama stated that families making under $150 thousand per year will see a tax cut. Those making between $150 thousand and $250 thousand will remain about the same and families making more than $250 thousand will see a slight increase. He also stated that the top tax rates will “defiantly be lower than it was under the Reagan administration” (CBS News Video). However, he does not specify at what time. There were three different tax rates in the 1980s. According to a graph found on heritage.org, President Reagan entered office with the top tax rate at 69.1% (the highest point on the whole graph). It was immediately cut to 50% and at the end of his term it fell to 28%. We are currently seeing a top tax rate of 35%, which is higher than what Reagan ultimately educed taxes to. Therefore, if we consider what he was trying to lead us to believe, Obama’s statement was misleading. His is a prime example of political rhetoric, obscuring the truth. When Barack Obama Claimed that he was not going to get into the “same old politics” and earn the peoples votes by being honest, he was doing anything but that. He is not different form any other politician when it come to the “same old politics”. Both he and John McCain are guilty of trying to mislead people, and that will never change in the world of government. Barack Obama’s tax plan looks beautiful on the computer screen, but that is because it is full of half truths, and almost certainly some empty promises (he is a politician after all). He has attempted to sell himself as above the traditional tatics of
Seppanen 5 politics, but now that we have analyzed an aspect of his plans for America, it is clear that he is just as much a politician as all the other ones.
Seppanen 6 Works Cited
"CBS News Video." Cbsnews.com. 22 Sept. 2008. CBS news. 23 Sept. 2008 .
"Economy." Barackobama.com. 2008. 19 Sept. 2008 http://www.barackobama.com/issues/economy/
"Fact Checking Obama." Factcheck.org. 29 Aug. 2008. Annenberge Political Factcheck. 20 Sept. 2008 .
Ferrara, Peter. "Obama's Tax Plan Is Really Welfare Plan." Wsj.com. 19 Aug. 2008. The Wall Street Journal. 20 Sept. 2008 .
"Income Tax Receipts Stay Constant Even As Tax Rates Decline." Heritage.org. 2008. The Heritage Foundation. 20 Sept. 2008 .
"The World Factbook- United States." Cia.gov. 4 Sept. 2008. CIA. 19 Sept. 2008 .