Obamanomics
Bookworm on Sep 03 2008 at 7:52 am | Filed under: Barack Obama, Taxes
As nice a summary as any I’ve seen of the practical effects of the proposed Obama tax plans:
But here’s the thing: It’s not that Mr. Obama hasn’t been specific enough in his governing plans. To the contrary, he has been very specific about his tax policy, health-care and energy proposals. It’s that voters are paying attention and appear not to like what Candidate Obama is saying.
Mr. Obama has proposed a massive tax increase on investors, business owners, and the “wealthy.” At a time when the American people rate the economy as the central issue of the campaign, a tax hike doesn’t make a lot of political sense. Voters know that a tax hike won’t help the economy.
Moreover, Mr. Obama’s tax plans would directly or indirectly harm U.S. investors by raising the capital gains and dividend taxes. More than half of U.S. households are equity owners, so Mr. Obama’s proposal risks alienating half the population.
Mr. Obama claims to offer a tax cut to moderate-income families, but a significant portion of Mr. Obama’s tax plan is a welfare giveaway costing more than $648 billion over 10 years, according to the Tax Policy Center.
How so? He would authorize a hodgepodge of refundable tax credits covering everything from education, mortgage payments, child care and other items for people who do not pay income taxes now.
About 38% of U.S. households pay no income tax today. Under a President Obama (whose policies would shave 15.3 million households off the tax rolls) that share would grow to nearly half of all American households.
We have been repeatedly told that everyone should pay their fair share. So this sounds grossly unfair and like a return of tax-and-spend liberal economics. No wonder there is a lot of doubt about the wisdom of the junior senator from Illinois.
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13 Responses to “Obamanomics”
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This is, at least, about Obama’s economic policy and not where he goes to church.
Jason Furman, one of Obama’s most important advisors, is not some socialist, soak-the-rich type. Hubbard, who cites very few figures in his editorial (which is sad for an economist), appears to have lost one of the proverbial two arms of his profession. Compare the right-wing leaning WSJ editorial with the following, directly from the source he references:
“Although both candidates have at times stressed fiscal responsibility, their specific non-health tax proposals would reduce tax revenues by $3.6 trillion (McCain) and $2.7 trillion (Obama) over the next 10 years, or approximately 10 and 7 percent of the revenues scheduled for collection under current law, respectively. Furthermore, as in the case of President Bush’s tax cuts, the true cost of McCain’s policies may be masked by phase-ins and sunsets (scheduled expiration dates) that reduce the estimated revenue costs. If his policies were fully phased in and permanent, the ten-year cost would rise to $4.0 trillion, or about 11 percent of total revenues.”
And later:
“The two candidates’ plans would have sharply different distributional effects. Senator McCain’s tax cuts would primarily benefit those with very high incomes, almost all of whom would receive large tax cuts that would, on average, raise their after-tax incomes by more than twice the average for all households. Many fewer households at the bottom of the income distribution would get tax cuts and those whose taxes fall would, on average, see their after-tax income rise much less. In marked contrast, Senator Obama offers much larger tax breaks to low- and middle-income taxpayers and would increase taxes on high-income taxpayers. The largest tax cuts, as a share of income, would go to those at the bottom of the income distribution, while taxpayers with the highest income would see their taxes rise.”
“The impact of the tax code on economic activity under each candidate’s policies would differ in several important ways. Under Senator McCain’s proposed policies, the top marginal rates (35 percent on individual income and 25 percent on corporate income) would be significantly lower than under Senator Obama’s plan (39.6 and 35 percent, respectively). McCain’s reduced individual and corporate rates could improve economic efficiency and increase domestic investment, but the larger future deficits would reduce and could completely offset any positive effect. In contrast, Senator Obama’s proposed new tax credits could encourage desirable behavior, particularly if the childless EITC and payroll tax rebate encourage additional labor supply among childless low-income individuals. However, he would also direct new subsidies at an already favored group-seniors -and an already favored activity-borrowing for housing-which could probably be better directed elsewhere.”
So McCain has to find $1.3 trillion more cuts than Obama. Has he done this? Nope.
McCain’s tax policies will benefit those with very high incomes, but will not improve efficiency or improve investment because they will create much larger deficits that are inflationary, distortionary and impede growth.
I wonder why Hubbard missed that? Maybe if he’d studied under Feinstein (Reagan’s economic advisor) and Greenspan (last Fed Chairman), as Furman has, then he’d have a clue.
dg,
In the interest of honesty lets revisit your post.
The article is clearly labeled OPINION.
Messrs. Furman and Goolsbee are, respectively, economic policy director and senior economic adviser at Obama for America.
Yeah, no bias here. Move along. Nothing to see.
http://online.wsj.com/article/SB121867201724238901.html
http://tinyurl.com/6×9ubs
http://taxprof.typepad.com/taxprof_blog/2008/06/comparison-of-t.html
The fact is that ,as with everything, opinions vary.
This is, at least, about Obama’s economic policy and not where he goes to church.
When your religion is distributing income, like yours is, Helen, economic policy is the same as church policy.
Here is a PDF that is easily read and understood contrasting the differences between the candidates tax plans.
Americans for Tax Reform
Which April 15 would you rather have?
http://www.atr.org/content/pdf/2008/August/082508pr-ObamaMcCain%20Matrix.pdf
Y.,
When your religion is distributing entering doctor’s offices, like pro-Lifers is, government policy is the same as church policy.
oops no distributing.
It’s not my religion, it is the individual’s religion, the doctor’s religion. Government enters into the picture by allowing people with their religions to follow their conscience? Interesting. I suppose your use of government scare tactics and intimidation to “balance” things out, is just fixing things, then, with doctors and individual choices they make.
“When your religion is … entering doctor’s offices, like pro-Lifers is, government policy is the same as church policy.”-Helen
Hmmm…I see your point, Helen. Wouldn’t want the government banning genital mutilation, infanticide, sutee, stoning, or such, would we. Let the doctors decide.
Rockdalian, the real question is: which April 15 would you rather your kids and grandkids have? If McCain proposes lower taxes, then he’d better propose a lot of cuts to cover it. Foisting the bills on future generations might be ok with you and a lot of other self-centered conservatives, but the original conservative thinkers in this country (e.g., Thomas Jefferson) opted to pay off those bills lest they saddle future generations with unfair debt burdens. If you think that Obama is picking up more youth vote just because of a coolness factor, then you are sadly mistaken. There is a generational economic battle going on, and the young folks have the moral high ground.
Of course I know that the piece was on the WSJ’s opinion page. But it is cited here and (likely) elsewhere because of the author’s perceived authority. That authority is misplaced when an economist speaks without numbers and contradicts more qualified, better trained economists. Even Art Laffer, arguably the inventor of supply-side economics, will tell you that lowering taxes will not necessarily increase growth if the countervailing debt burdens create other problems (e.g., inflation, weakened currency, income inequality, etc.).
you and a lot of other self-centered conservatives
Demcorats are self-centered; Republicans are not. It is this self-delusion and difference in world view that makes the problems appear, dg. It always has. You think Iraq’s evil, we think it is good. You think Israel can win through submission, we think they can win through superior firepower.
It is these kinds of differences that demonstrate why people like Oz is wrong. That and the fact that people like dg and Oz can agree, when Oz wants to sit on the fence and say Democrats are the same as Republicans.
Y, everyone is self-centered. Republicans think this is a virtue on some issues (economic) and not on others (social), while Dems are kind of the opposite. As Machiavelli noted long ago, the virtuous and good are not long tolerated by his neighbors, who are not so.
Are you taking up Oz’s nihilism, now, with “everyone” is so and so?