2008 Obama Tax Plan By: Enrico Silva

The 2008 election was one of the most important events in presidential history. America made its decision for who was going to be our leader to guide and pull the nation out of what is to believe the worst recession since the great depression. That chosen leader was Barack Obama. One of Obama’s plans to help the economy was his tax policy, specifically what he was going to do with income, payroll, investment income, and estate taxes. As of yesterday, being re-elected for president for four more years, has Obama’s tax policy help rehabilitate the economy or deteriorated it even more?

             

In 2008, Obama’s proposal for income taxes was to restore the top two income tax rates from 33 % and 35 % to 36 % and 39.6 %. This proposal would also reinstate limitations towards how much one receives on given deductions or personal exemption higher-incomers can take. The tax cut that was imposed before Obama’s proposal was called the Economic Growth and Tax Relief Reconciliation Act. According to the previous post, this act indeed contributed a great amount towards the United States deficit. For his proposal on investment income taxes, he wishes to continue treating gains and dividends equally by keeping the current rate for everyone except for high-income households 

            

What Obama basically wants to do is renew the Bush tax cuts by keeping the tax rates for lower and middle income individuals/families while at the same time letting the rest of it expire, which will increase tax rates towards those who obtain high income. Based on the “Analysis: A look at tax deal's pros and cons” by Richard H. Dunham, not only was this tax cut unfair to the majority of Americans, but it does not and cannot help with the creation of more jobs in the United States and that this plan will only benefit to our country’s deficit by about one trillion dollars during a short amount of time.      

            

In addition to his policies, for payroll taxes, Obama wishes to tax amounts over the salary of $250,000. This falls into play with what the borderline between middle and high incomers with anything being above $250K high income. He wishes to make the Social Security Program more progressive by better funding it. What Obama also wants to do is to freeze estate tax exemption amount at $3.5 million from its $2 million level and the $1 million level it's set to revert to in 2011. He will continue to keep the current rate of 45% which would change to 55% in 2011.

           

According to Timothy Hoah”s “You Don’t Raise Taxes in a Recession”, as of September 2009, our economy has slowly but surely growing from the recession. Seeing as though Obama is president during the time, it may seem he did help our economy. Some may say that this may not be the case. Until Obama’s new Medicare tax hikes on high incomers will come into effect January 2013, we can then see if this will eradicate our deficit.

             

America made its decision in 2008 and elected Barack Obama. Obama’s tax plan is said to help our nation’s deficit into reducing it and it is contested whether he did or not. Majority of the U.S population voted for the re-election of Obama and this action speaks louder then it’s words. If it didn’t, then there’s four more years to decide whether or not Obama’s tax policy is a gift or a curse to our country.       

Sources:              
The New Republic "You Don't Raise Taxes In a Recession" By: Timothy Hoah 
CNN: What Obama Means By Tax The Wealthy 

Bush-Era Tax Cuts

During George W. Bush’s term in office, he proposed two tax cuts, better known as the Bush-Era tax cuts.  Congress eventually passed these tax cuts but had expiration tags attached to them, set to expire in 2010.  During Obama’s term in office, he extended the acts that were passed to expire in 2012.  Now that we are nearing the 2012 Presidential Election Day, each candidate has a different take on whether or not to continue and keep the Bush tax cuts.  Obama wants these tax cuts to expire for the wealthy while Romney wants to renew it for all classes with a low tax rate.  As much as it may sound good to decrease the percentage of tax placed on Americans, all it has done was add to the country’s deficit. 

The 2001 tax cut was known as the Economic Growth and Tax Relief Reconciliation Act. This act made a lot of important changes to income tax rates, real estate, 401k plans and much more.  Those making more than about $312,000 had their taxes cut from 39.6% to 35%.  The next category decreased from 36% to 33%, and so decreasing each bracket by 3% by 2006.  This act also created a new category for those making less than 12,000, cutting their taxes from 15% to 10%.  Under this act, the alternative minimum tax exemption was raised to $49,000 for couples and about $35,000 for singles. The 2003 tax cut was known as Jobs and Growth Tax Relief Reconciliation Act.  This act decreased the capital gains and was made to speed up the process from the 2001 act.  This act also increased the exemption for the alternative minimum tax.

The main goal of these was to reduce the tax rate over the span of several years.  It has not helped the economy grow in any way and is actually considered to be the top U.S. debt contributor.  According to Harry Bradford, of The Huffington Post, if the Bush tax cuts are not renewed, it is projected that over 10 years the deficit would be reduced by about 1 trillion dollars.  

The Democrats want the Bush tax cuts to expire on the wealthy but will renew it for those making less than $250,000. Paul Krugman, a well-known economist, once stated, “Wealthy Americans who benefit hugely from a system rigged in their favor react with hysteria to anyone who points out just how rigged the system is.” In reaction to the Democrats’ proposition, the Republicans are threatening to vote against it if it came down to Obama winning and moving forward with that plan.   As we’ve seen from Clinton’s presidency, allowing the wealthy to pay more in taxes will help the economy in the long run because it will lower the deficit and help create more jobs, all in all creating a good economy.  

The Republicans are opposing the Democrats’ view and actually want to renew the Bush tax cuts on all classes. The Republicans believe that if it were to be renewed only for the lower and middle class, like the Democrats want; it would affect economic growth and job creation, referring to the “trickle down”.  As we have seen from past, attempts of placing more money in the hands of the rich in order to create more jobs and get the economy growing has not worked, so what would make it any different now?

Last Edited on November 16, 2012.

References

Bradford, Harry. (2012. Aug. 8) Bush-Era tax cuts will cost U.S. nearly $1 trillion over the next decade.  Retrieved from <http://www.huffingtonpost.com/2012/08/24/bush-era-tax-cuts-revenue-expire_n_1828657.html#slide=1428571>

Gale, William and Harris, Benjamin. (2008. Jan. 23). How did the 2001 tax cuts change the tax code? Retrieved from <http://www.taxpolicycenter.org/briefing-book/background/bush-tax-cuts/2001.cfm>

Gale, William and Harris, Benjamin. (2008. Jan. 23). How did the 2003 tax cuts change the tax code? Retrieved from <http://www.taxpolicycenter.org/briefing-book/background/bush-tax-cuts/2003.cfm>

Garofalo, Pat. (2012. July. 9). Why letting the bush tax cuts for the rich expire will not hurt the economy .  Retrieved from <http://thinkprogress.org/economy/2012/07/09/512741/charts-economy-bush-tax-cuts/?mobile=nc>

Jobs and Growth tax relief reconciliation act of 2003. In Wikipedia. Retrieved from <http://en.wikipedia.org/wiki/Jobs_and_Growth_Tax_Relief_Reconciliation_Act_of_2003>

Presidential Debate Round 2: Taxes

During the second Presidential Town Hall debate, specifically at 21:25 minutes into the session, a question was asked by Mary Polano towards governor Mitt Romney. The question asked was "You have stated that if your elected president you would plan to reduce the tax rates for all the tax brackets and that you would work with the congress to eliminate some deductions in order to make up the lost in revenue, concerning these various deductions, the mortgage deduction, the charitable deduction, the child's hacks credit, and education credits, what would be your position on those things which are important to the middle class?" Mitt Romney replied that he wishes to bring rates down, simplify the tax code, and have middle income tax payers to have lower taxes. Barack Obama respond to the question by stating that he wishes to giver lower and middle income tax payers relief and he has done that by 3,600, and 18 tax cuts towards small businesses. He says he is going to continue doing so and make upper class citizens pay more in taxes. The reason why he this hasn't gone through yet is because republicans wish to have tax breaks for upper class citizens and basically not cooperating with him.


Click Links Below To View Summarized Views On Each Candidates Tax Reform
Mitt Romney on Tax Reform
Barack Obama on Tax Reform         

Obama's "Buffett Rule"

In the article Obama Tax Plan Would Ask More of Millionaires written by Jackie Calms was published in the New York Times back in September 2011 we learned that President Obama plans on taxing those who make more than one million a year pay a tax rate that will be close enough if not equal to the rate of taxes people who belong to the middle class. The idea of this proposal came from a billionaire known as Warren E. Buffett. The New York times article wrote that “the billionaire investor who has complained repeatedly that the richest Americans generally pay a smaller share of their income in federal taxes than do middle-income workers, because investment gains are taxed at a lower rate than wages.” This also leans towards the idea that the rich get richer while the poor stay poor. One of the reasons for Obama wanting to get “Buffett Rule” is because he believes it is fair for those making more money pay more taxes. Obama also believes that it’ll help our economy’s deficit begin to disappear.

A counter argument for this idea however is that there may be discouragement for people to invest. Or at least that’s what the Republican Party claims. In another article “Rebuffing Obama’s gimmicky ‘Buffett Rule’” written by Dana Milbank from the Washington Post from this year back in April also discusses some of the reasons as to how and why this plan may not work out well. In the article by Milbank wrote that “A search of the White House Web site yields 17,400 mentions of the Buffett Rule a proposal that would bring in $47 billion over 10 years, much of that from 22,000 wealthy households. By contrast, the alternative minimum tax gets fewer than 600 mentions on the site. The AMT, if not changed, will take about $1 trillion over a decade from millions of taxpayers, many of whom earn less than $200,000 a year.” He doesn’t believe the “Buffett Rule” makes much of a difference nor will it be good. Find out what the Obama’s “Buffett Rule” would do for you in the tax calculator link below.


Tax Calculator



The picture above is of Warren E. Buffett

On October 3, President Obama and Governor Romney had their first presidential debate. During the debate both parties told our nation what their plans and ideas were on taxes. President Obama had pointed out that Romney’s plan has been to cut taxes for the rich. Romney’s response to this was that he does not want to cut taxes for the rich, he however had made the comment that "We're going to cut taxes on everyone across the country by 20 percent, including, the top 1 percent" in a debate earlier this year. In the article below you can read a bit more about what Romney has been stating about taxes.

What Romney has to say about Taxes

In the link below you can see the entire video of the first presidential debate that took place this Wednesday, October 03, 2012. You may also see what Obama had to say about his ideas on taxes if you scroll down to the twelfth minute in the debate. 

Obama believes the economy is doing best when the middle class is doing well financially which is the reason why he has been cutting back taxes on the middle class for the past few years.

What President Obama said during the debate on Wednesday about Taxes