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What Obama’s tax plan means to the middle and lower class. October 20, 2008

Posted by Nevada Pundit in Barack Obama, Economy, Policy, Taxes.

Many lower income Americans are loving the idea of receiving the tax credits that Obama has proposed during his campaign, but will they really benefit? Obama’s tax plan doesn’t revolve around actual tax cuts for middle and lower income families, it revolves around tax credits. What this means is that the whole gain of which will be received once a year at tax time as a larger rebate check even though corporations and companies will be paying into this all year.

What people haven’t asked themselves is what the companies response to these higher taxes will be. As far as companies are concerned taxes are simply a cost of doing business. If the cost of doing business increases then companies will react. This reaction can take on any of three forms or any combination of them, which will probably be the case. The first is lower dividends or payouts to its shareholders, which of course where Obama is hoping this comes from even though he doesn’t mention much that this is where our 401k growth comes from. The second is higher prices of goods and services, which will affect people throughout the year even though they only get the extra money from the government once a year. Better learn to budget well. The last place that companies will make up this money is through lower wages and/or less jobs, not a wonderful prospect for us working class.

Obama’s entire plan depends on keeping the status quo but history and basic Business 101 shows us that companies will react and we the middle and lower income will suffer. Realistically, the best we can hope for under Obama’s plan is to have the roughly the same amount of buying power but now with the added bonus of having another layer of bureaucracy and the cost that comes with that, both in terms of money and additional government influence in our lives. Based on the wonderful job ours or any government has done in the past (insert dripping with sarcasm here) that is a layer I would rather do without.

You cannot help the poor by destroying the rich.
You cannot strengthen the weak by weakening the strong.
You cannot bring about prosperity by discouraging thrift.
You cannot lift the wage earner up by pulling the wage payer down.
You cannot further the brotherhood of man by inciting class hatred.
You cannot build character and courage by taking away men’s initiative and independence.
You cannot help men permanently by doing for them, what they could and should do for themselves.


–Abraham Lincoln





1. Randall Stephenson - October 20, 2008

Abe’s rules made good sense when the ratio between the CEO’s pay and the worker’s pay was 30:1. It even made sense at 70:1.

But now that the ratio between the top earners and lowest earners is more like 200:1 or even 300:1, these arguments fall apart.

If we stay on this path, we will increasingly become a nation of the super-rich and the dirt poor, with a very small middle class between. Or, at some point, we will end up with another revolution or authoritarian leadership, or both.

The better path is a logarithmic progressive tax, that doesn’t stifle entrepreneurship and creativity, but does bring the earnings ratios back closer and stimulates the growth of the middle class.

2. Nevada Pundit - October 27, 2008

Rebuttal: By this definition the average income in America is $1250 a year or 1/200 of $250,000 dollars. This isn’t a means to even the field for the very small percentage (less that 1%) that actually make 200 times the national average.

85% of small businesses that make $250k or less have no or 1 employee. This type of tax increase lowers the incentive to increase the size of the business, therefore jobs are not created and we the majority suffer.

3. fiddlecraig - October 28, 2008

That rebuttal is based on the idea that the top 5% of income earners make $250,000 each. Not so. The relevant figure is that the top 5% of income earners, as a whole, take in 40% of the total annual income in America, so it’s only fair that they pay 40% of the taxes, as they will under Obama’s plan. Incentive? How’s this? If you want to make a lot of money in the long run, you need to evaluate risk ever more carefully as larger amounts of money are involved, because taxes keep huge sums from multiplying at exponential rates, so your endeavors focus tend to produce long-term steady growth.

4. Nevada Pundit - October 28, 2008

Oh come on fiddlecraig, the top 5% already, right now, pay 60% of all taxes.

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