The Tax Plans -- Tony

All of this information is from the "Presidential Candidates Tax Plans" pdf found HERE:

I suggest you read through it on your own. It gives you as much detail as you want to form your own opinion.

What I've done below is summarize based on the document, but first some housekeeping (background info).

What exactly will happen when the "Bush tax cuts" run out in 2010? This is a good summary of what will happen:
"...this means that in 2011 the 10 percent tax bracket will disappear; the current 28, 33, and 35 percent tax rates will increase to 31, 36, and 39.6 percent, respectively; the capital gains rates will increase from 0 and 15 percent to 8 or 10 and 18 or 20 percent (with the lower rate applying to long-held assets); the child credit will shrink to $500 per child and be nonrefundable for most taxpayers; the top of the 15 percent bracket and the standard deduction for married couples will no longer be set to double the amounts for single filers; the top estate tax rate will increase to 55 percent and the exemption will decline to $1 million; and numerous other provisions will revert to their previous form or expire. ..."

What is the Alternative Minimum Tax?
"...Individuals must compute their taxes under both the regular tax and the alternative minimum tax. If the alternative minimum tax exceeds the regular tax, taxpayers must pay the higher amount. The AMT requires taxpayers to add a number of otherwise untaxed items (including personal exemptions, state and local tax deductions and certain other deductions) to their taxable income and disallows some tax credits, but taxpayers may also claim a special AMT exemption. Since 2001, the AMT exemption has been temporarily increased for a year or two at a time to prevent large numbers of taxpayers from becoming subject to the tax. In 2007, the exemption was $66,250 for joint returns and $44,350 for singles and heads of household. But, in 2008, the AMT exemption is set to return to its 2000 level—$45,000 for couples and $33,750 for singles and heads of household—and the number of taxpayers subject to the AMT is projected to increase from 3.5 million in 2007 to 26.5 million in 2008. ..."

Now for the plans:

McCain's Tax Plan:
*Make Bush's tax cuts permanent - Essentially leaving the high marginal income tax rate of 35% in place for personal income taxes.
*Lower the corporate income tax rate - Essentially reducing the current 35% rate to 25% for corporate taxes.
*Leave capital gains tax as is
*Increase deductions for taxpayers with dependents (2/3rd increase)
*Extend the Alternative Minimum Tax "Patch" to keep the higher deductions
*Elimination of prefferential tax treatment for oil companies
*Review and eliminate many loopholes in the tax code

Obama's Tax Plan:
*For people with income under 250K, he would extend "certain provisions" of the Bush tax cuts. Essentially leaving them in place
*For people over 250K, he will immediately end the tax cuts and raise the marginal tax rate between 2 and 4 percent and add a 2 percent Social Security tax increase and restore the phaseouts of personal exemptions and itemized deductions.
*Raise capital gains tax to 20%
*Extend the Alternative Minimum Tax "Patch" to keep the higher deductions (just like McCain)
*Expand the amount of Earned Income Credit
*For incomes under 75K he will put in place a "Make Work Pay" tax credit to give families up to $500 additional dollars ( http://www.ontheissues.org/Economic/Barack_Obama_Tax_Reform.htm )
*Tax cuts for seniors making under 50K
*Review and eliminate many loopholes in the tax code

These are just the main points. These are just tax issues. This is not about addressing the social programs these taxes will pay for, just the tax issue itself.

My purpose here is to explain how I see the situation, not to sway anybody. Hopefully Eric will do the same.

I am not totally on board with McCains tax plan. I don't think the Corporate tax rate needs to be reduced from 35% to 25%. Under Clinton it was 40%, so I personally feel that 35% is a fair enough number to keep companies from running off to India (those that haven't already). On top of that, I don't agree with the repeal of the estate tax. I mean gifted amounts up to 695K are already tax free and I PERSONALLY feel that a gift of 7 million should be taxable. It wasn't earned, it was a gift, although if tax was already paid on that amount by the giver why should the money be re-taxed? I don't know, maybe I do agree with this repeal, I don't know.... I also don't think we need to increase the dependent deduction. The normal increase for inflation is sufficient for me. Other than that, I think the Bush tax cuts should remain in place. I think the economy was fine prior to the housing bubble going POP. Yes, because of the war, we are digging ourselves a hole, with the deficit that is. McCain plans to have a balanced budget (and thus a chance to start working towards paying back the deficit) by 2013. He plans on doing this by cutting back on discretionary spending (read defense spending) and stopping earmarks and other frivolous programs. In fact he has a reputation for butting heads with the GOP on these issues already.

On the surface, Obama's plan seems like a home run. I fall into that lower-middle class category, so for me, according to his website my taxes won't go up. I am still a little vague on this because he says he will extend "certain provisions" of the Bush tax cuts. But for the sake of this post, I'll assume my tax status won't change. So some would say, where's the problem then. Obama says it best himself, he "wants tax fairness" and believes that "everyone should pay their fair share of taxes". I agree with that statement, but my definition of fair is different from Obama's definition. I'm well aware that both sides use mis-worded phrases to get their point across, remember Hannity and the "Obama tire pressure energy plan". The left uses the same technique. They say Obama will go after the "rich" and make them pay their fair share of taxes. An image of a spoiled country club boy name Chip comes to mind, you know like the horrible lacrosse boys from Duke. It makes you think that yes, those spoiled brats deserve to pay more taxes, they don't deserve it.....but in reality, Obama's definition of "rich" is $250k. Seems like alot. To me it is a lot. My wife doesn't work, I live in a low income area. But in areas like DC, New York, LA, San Fran, insert any other major metro area, 250K for a family of 4 is probably above average, but not so much that I feel they should be shouldering the burden of everyone else. Under the current tax code, low income families already don't pay any income tax or at worst a minute amount.

I guess it all comes down to what you believe is right. If you believe people making over 250k should be held to pay more than their fair share of taxes, then you can legitimatley support Obama's tax plan. I don't make 250K, I'll probably never make 250K, but I can strive to get there, I can continue to take training courses, get certifications, learn new technologies in an effort to make myself more marketable, so that one day maybe I can get there. I just feel that you are punishing success and making people who succeed feel guilty for it. According to the 2007 Tax Schedule from the IRS website, those in the upper echelon (above 349k) pay 35% plus 36% on any amount over that 349k with no limit. That 35% is higher than the 28% people in the lower echelon pay. Maybe I'm missing something here, but it looks to me like those with a personal income over 349k pay a higher percentage than those with an income under 31k. That is at face value, not taking into account any deductions. A common argument is that those "rich" people have more money to hire better accountants to find more loopholes and tax shelters. That is true, I won't argue that. But that is not a problem with the tax code, that is a problem with loopholes in the tax code, which both candidates say they will address. I'm no fool, I know people are taking advantage of the system, but studies show that when the tax rate goes up (as under Clinton) the amount of personal deductions rise to compensate, across the board. So when you raise the taxes on those "rich" they will just get their fancy accountants to work harder.

If the tax increase was going towards the national debt, I may be able to buy into it, but I think it should be across the board, not weighted towards successful business people or consultants footing more of the bill. But Obama's taxes are not going towards paying off the national debt, they are simply paying for the new tax breaks for the lower income and new social programs. Very simply put, it is the Robin Hood principal.

Look, I'm trying my very best to believe these tax cuts are fair and will benefit us. I just don't think it's fair to demonize people who make over 250k and ask them to foot more than their fair share of the bill. It's like the harder you work, the less breaks you get. Let them do it voluntarily if they want to.....Put a line on the tax form that allows the "rich" to apply an extra amount towards lower income people.

To me, IN MY OPINION, I think the tax code as is is fine. Once we get out of Iraq, weed out the wasteful spending, eliminate earmarks, etc... we will be able to get back to a balanced budget under McCain's plan. Like I said, I disagree with lowering corporate tax rates, they are fine like they are. I think Obama will have to find more tax money to cover the National Health Care plan and other programs he has in his Blueprint. There are alot of documents I've found that show how Obama's "tax the rich" strategy will actually hurt the lower and middle class, but I couldn't fully grasp them, so I didn't address them. Here is a chart from this article, but I must restate, I don't fully get it: