With all the attention being place on oil and energy in the past few days I thought I’d take another look at taxes. One of the least popular issues that every Presidential race focuses on. And consistently the public has the same request, lower taxes.

For 2008, the ‘election of change’ [a dumb concept considering that is a fact], we have 2 very explicit views. I say explicit, but if you don’t listen carefully or check any other details you may be distracted of confused by the polispeak that each candidate employs. So I want to take a moment, before the rhetoric switches back after the energy issue stops catching headlines, to look at their stances clearly (as found at The Tax Foundation).

Deferring to experience I will start with Senator McCain.

Originally opposed to the President Bush tax cuts, Senator McCain now is in support of this tax plan. He also favors cutting corporate taxes by 10%. For those that suffer from estate taxes he plans to implement a move to only 15% tax on estates over $10 million. He wants to remove the alternative minimum tax, which affects many middle-class families which it was not intended to tax, and he is strongly against any increase in taxes related to Social Security.

Now for Senator Obama.

While he has already voted to increase taxes for anyone making $31,850 he has publicly stated that he will only repeal the Bush tax cuts for the top 1% of the nation. How such a law could be enacted is unknown, and considering that proposals and campaign promises of a similar nature have never occurred his repeals may include more people. He has also promised to eliminate taxes for all seniors that make less than $50,000. When it comes to corporations Senator Obama has stated he will “close loopholes”, which means whatever you wish it to. He has no expressed plan for estate taxes or the Minimum Alternative Tax, presumably leaving them both in place. But he does have a defined plan for the Social Security tax, which he plans to increase – directly coming from wages. There may be an exemption for those above $102,000 but it isn’t clear.

Senator Obama also has several other plans related to taxes that Senator McCain has no comparable for. Senator Obama will create several ‘credits’ for various Americans. One credit will apply to those that work and make over $8,100 – the credit will be for $500 or $1,000 for families. He would also create a 10% credit for all homeowners with a mortgage. This mortgage owner credit would amount to about $500. There would also be an earned income credit for those making minimum wage and working full-time for $555, if children are being supported “responsibly” [how and who determines that?] then another $1,110 is available. For those in college up to $4,000 can be forgiven. Lastly Senator Obama wants the IRS to issue tax forms that are partially pre-filled to reduce the time in filling out the forms.

Now I’m sure both plans have their appeal points, and many with children like the comments by Senator Obama. But let’s look at this in total.

Senator Obama has already voted to increase taxes of most Americans 3%, which he publicly stated he would not do. Because of that I feel every other statement about taxes he has made is in question. In addition every attempt to isolate any singular group of Americans to pay higher taxes has failed. Inevitably Americans not expected to be paying higher taxes do so.

I agree with the concept of excluding taxes for senior citizens that are making enough money to survive on their own. I do not agree on the fixed price or the cap. While $50,000 may sound comfortable today, not long ago $30,000 sounded the same. Any provision that does not take into account the increase of cost of living, nor the cost of medications (which older Americans have higher budgets on disproportionately) fails those it is meant to help.

While spouting polispeak about corporations and their earnings is a winning strategy with unions and newspaper headlines, it is not an effective tax plan. There are some loopholes in the corporate tax code that should be removed, but the real boost to the economy is decreasing tax rates. This allows businesses to increase the number of people employed, or raise their pay, or fund research, or expand to increase scales of economy. Whichever is done the economy for the nation receives more revenues in multiple areas that were stagnant prior. Raising corporate taxes has the opposite effect.

Estate taxes are a special situation that most Americans don’t fall under. Even so, for those that do have to deal with these taxes, they are huge. While most like to point out the multi-million dollar estates, those with far less pay the same tax now. Again this limits gaining revenues on these funds from other sources that could stimulate the economy. But I don’t have a strong opinion on this point.

Social Security is commonly called the “third rail of politics” and it is aptly named. Older voters are sensitive to anything that might affect their money. Considering that most voters are older, and this number is about to swell as baby-boomers age, this is an issue that none want to be on the wrong side of. Then again, younger voters have little interest in funding a program that they in all likelihood will never receive a dime from. SSI is a flawed program that has never worked exactly as planned. Increasing money by raising taxes on those that can’t afford it does little to help anyone beyond actually pushing its problems onto either another administration or generation. Senator Obama’s plan sounds exactly like that.

Senator Obama’s plan for college students sounds eerily like the short-lived plan proposed from then-potential candidate Senator Hillary Clinton. This plan forgives money instead of providing it though. A major question is this though, who will pay the $28.8 billion that this plan would absolve each year. [That assumes that only 7.2 million Americans go to college - and would this include those who take college courses online?] The money from this would have to come from somewhere, which means higher taxes.

I like a 10% credit for mortgages, as I will soon own a home. But in reality I don’t need it. My home purchase is based on the fact that I can well afford the mortgage, and that it is a fixed rate. Those that prepare properly for a home purchase have no need of a credit. Those that do not will not be saved by what would amount to maybe 2 months payment on their obligation. If this plan were less polispeak, it would be designed to help stimulate the economy – especially since 96% of all mortgage holders are paying on-time.

I can’t think of anything more to ask about a credit for those that have children [specifically it seems targeted to fathers paying child support] than who and what criteria equate to responsible. How would this be enforced. Under it’s current wording this implies that the Government would be involved actively in raising every child in America, under arbitrary and politically motivated rules. And what happens if the Government claims you are not being responsible? Do they take the children from the parents, or incarcerate them, publicly ostracize them or penalize them in some other way? Considering that the Government can’t balance a checkbook or check out foods for potentially deadly diseases I don’t trust their opinion on what is “responsible” in child rearing.

And lastly the IRS tax forms. It’s a nice polispeak rabble rouser. It gets headlines. It sounds great, until you think about it. How long do you think it will take to mail out tens of millions of printed tax forms? How will those who have never filed a tax form prior file? How much will this cost to be made? Especially since each and every form will be individual so scale of economies will never take place (never mind the fact that it would likely cost more each and every year – like stamps).

And perhaps most importantly, how will the Government ensure that every document is sent out to the proper person. Because if even one were to be mishandled, or one employee were paid off, identity theft would be rampant. Some would counter that the government send out documents now though no numbers exist on how many are improperly delivered. But the counter would accurately be that the Government is inefficient in every department, what would cause the IRS to suddenly become so?

So in honestly reviewing the tax positions of Senator Obama and Senator McCain, on balance I see McCain with better plans and more effective for the nation. You may not agree, and if so I’d love to hear where I got it wrong. And if I got it right let me know. [please remember I’m not an economist so don’t get too technical on me.]

Labels: college tuition, IRS, mortgage loans, Polispeak, Presidential election race 2008, Senator Barack Obama, Senator John McCain, Social Security, tax policy, tax rates

As the race for the Presidency of 2009 reaches its next stage I feel it’s important to go back over several issues that were ignored in the recent past. Issues have been broadcast for days and weeks now about the character of associates of the candidates, and race and gender. Yet most pundits and major news media have seemingly forgotten the issues in their never ending desire to promote their ratings.

So let me present the issues that I have noticed are truly important to the majority of Americans.

1. The war in Iraq.
No matter your opinion of how correct we were to get into the war in Iraq, America is fighting now. Placing blame on the past decisions has kept many busy, and used up valuable energy, but resolved nothing. The issue at hand is simply this; either we win or we run away.

If we run away, the results will include the instability of the region, the empowerment of Iran, an increase in the cost of oil, likely heightened threats against Israel, and inevitably attacks against Americans and America. When I say attacks against us I mean just that, terrorist acts on varying scales killing civilians in their homes and work on our soil. Because the various factions that take over Iraq in our absence will definitely (fairly and unfairly) blame every ill on America, and the orphaned sons and daughters will eventually be coerced to seek out and kill Americans.

Conversely if we go for the win we must commit more funds and resources, risk international disdain, and lose members of our military. Ultimately we will have to have a military base in Iraq, not unlike Japan or Germany. As much as ultra-liberals may like to misquote Senator McCain’s comment, it is likely that winning the war in Iraq will require our PRESENCE over the next several decades, with some portion of that time being in various levels of actual combat.

2. Education
There is little argument that the children in public schools today are dumber than the generations that preceded them. It may not be the nicest statement, but it is accurate. Children today are less creative, active, and deductive than perhaps since the start of the industrial revolution. They are being asked to memorize various facts, yet comprehension of those facts are at record lows. Fewer know what is in the Bill of Rights, can identify North America on a map, or how to properly structure a sentence. And this is while there is unprecedented access to the knowledge base found on the internet, and more instantaneous connectivity then ever before.

Kids today are being taught less and retaining bare minimums. While this may be most obvious in cities throughout the nation, it is a national event. The long term effects of this will be devastating to the nation.

3. Economy
While the unemployment levels are hardly at levels in the 70’s many are feeling like they have less money than in decades. Interest rates are incredibly low, yet tens of thousands are on the edged of losing their homes. Average wages are up from the past and discretionary spending is high (unless you count an iPod as essential) but the average person has $6,000 in credit card debt. Few feel secure in their jobs.

Considering that crude oil prices are brushing against my prior year high estimate, gasoline and winter heating oil prices are sure to hit millions hard. Add to that the higher cost of food due to ethanol production, and that glut levels are increasing with Federal production mandates, and you find consumers with less money than may have been planned. This says nothing of the potential inflation that may be caused with interest rates as low as they are.

The Presidential candidates have offered 2 different ideas. One is to take more money from taxpayers, the other to cut taxes. While the tax increase is stated to target only the “rich” such a definition is vague at best. Recent votes in Congress have included those making $31,850 or more for increased taxes of at least 3%. The tax cut is stated as being universal, with a goal of affecting the middle class primarily.

4. Safety
National safety from internal and external sources. While some would prefer to think that America is safe from future foreign attacks, the reality of the world is that we are not. Like the best of safes, eventually someone will break in and in like manner America will be attacked. Minimizing the nature and scope of such an attack is vital. A madman with a gun or suicide bomb is unsettling, but far less devastating than airplanes as weapons, a radioactive ‘dirty’ bomb, poisonous gas, or other mass attacks.

As far as I am aware, these are the most critical issues facing America. These are the questions that need to be answered by our next President. There are other issues but these seem to be the primary ones.

This is what we need to hear the candidates answer. This is the planning that we need to understand. These are the things that will provide us the best President for the nation.

Any other reason or issue is secondary in my opinion. Even worse, the attempts by the media to grab ratings distorts the answers we need to hear and blocks the things we need to know. Answers and plans.

As this final phase of the Presidential race continues I suggest we all keep these issues in mind.

Remember you only get one vote, and once you have you don’t get a do-over.

Labels: Crude oil prices, education, Iraq War, Presidential election race 2008, tax policy, tax rates, terrorist attack

How rich do you feel if you are making $31,850 or more?

If you are like most families and individuals in America, I imagine that you don’t. In fact I would say most would feel relatively poor. Not because of a lack of luxury items or failing in a competition with the Jones’ but because of a scarcity of essentials and a knowledge that loss of everything is possible.

Americans in the middle class don’t feel rich because they are the ones losing their homes to the mortgage crisis. They are the ones incapable of affording better colleges (or sometimes any college) for their children. They are the families most often without healthcare coverage and unable to afford medical costs.

And they are the ones that are going to feel even worse if Democrats, and the Presidential candidates Senator Clinton and Senator Obama, get their way. I don’t say this because of some ideal, or dedication to the Republican Party. I say this because that is exactly what they are voting for.

“Senators voted 52-47 to reject a move to extend tax cuts for middle- and higher-income taxpayers, investors and people inheriting businesses and big estates.”

and

“Obama and Clinton both promise to reverse Bush's tax cuts for wealthier taxpayers, but the Democratic budget they'll be voting for would allow income tax rates to go up on individuals making as little as $31,850 and couples earning $63,700 or more.”

So, if you make $31,850 or more you may not feel like Bill Gates and Warren Buffett but you are going to get taxed like them.

This is not a surprise because for all the statements by Democrats that running scared from Iraq will turn the economy around, and their implication that universal healthcare is the same thing as free health care the facts are that more money will come out of our pockets to pay for it all. Your pocket, whether or not any of the things you will be paying for will provide a single benefit for you or those you know.

This is what a Democratic President will provide. Some may believe that this is a small price to pay. Some may believe that all businesses should pay more in taxes. And some may believe that terrorists and those hostile to the existence of America will give up their fights just because we turn our backs.

But I believe that increasing the taxes that the middle-class and businesses pay will not improve the economy. I believe that giving money TO problems rather than spending money to FIX the problems is foolish. I believe that turning your back on a bar fight will get your head cracked open from a chair smashed upon it. I believe that nothing is free, and some things are too expensive to be worthwhile.

The Democratic candidates have marched across America saying they will only tax the rich. They have said that they will only affect big business. They have said that they will make America safer. All are great things. But the facts of their actions indicate they are lying if not confused.

“Under both Democratic plans, tax rates would increase by 3 percentage points for each of the 25 percent, 28 percent and 33 percent brackets. At present, the 25 percent bracket begins at $31,850 for individuals and $63,700 for married couples. The 35 percent bracket on incomes over $349,700 would jump to 39.6 percent.”

So here is the big question for the up-coming election. If you aren’t rich at $31,850 and the Democrats are going to increase your taxes, what other plan proposed by them is equally skewed to your disadvantage?

Labels: American economy, Bill Gates, college tuition, Democratic Party, Iraq War, mortgage crisis, Senator Clinton, Senator Obama, tax increase, tax rates, universal healthcare, Warren Buffett