Obama's Taxes

The first loophole was easy to find: Senator Obama doesn't "count" allowing the Bush tax cuts to lapse as a tax increase. Unless the cuts are re-enacted, rates will automatically return to the 2000 level. Senator Obama claims that letting a tax cut lapse -- allowing the rates to return to a higher levels -- is not actually a "tax increase." It's just the lapsing of a tax cut.

See the difference?

Neither do I.

When those cuts lapse, my taxes are going up -- a lot -- but by parsing words, Senator Obama justifies his claim that he won't actively raise taxes on 95 percent of working Americans, even while he's passively allowing tax rates to go up for 100% of Americans who actually pay Federal income taxes.

Making this personal, my Federal Income Tax will increase by $3,824 when those tax cuts lapse. That not-insignificant sum would cover a couple of house payments or help my two boys through another month or two of college.

No matter what Senator Obama calls it, requiring us to pay more taxes amounts to a tax increase. This got me wondering what other Americans will have to pay when the tax cuts lapse.

For a married family, filing jointly and earning $75,000 a year, this increase will be $3,074. For those making just $50,000, this increase will be $1,512. Despite Senator Obama's claim, even struggling American families making just $25,000 a year will see a tax increase -- they'll pay $715 more in 2010 than they did in 2007. Across the board, when the tax cuts lapse, working Americans will see significant increases in their taxes, even if their household income is as low as $25,000. See the tables at the end of this article.

Check this for yourself. Go to http://www.irs.gov/formspubs/ and pull up the 1040 instructions for 2000 and 2007 and go to the tax tables. Based on your 2007 income, check your taxes rates for 2000 and 2007, and apply them to your taxable income for 2007. In 2000 -- Senator Obama's benchmark year -- you would have paid significantly more taxes for the income you earned in 2007. The Bush Tax Cuts, which Senator Obama has said he will allow to lapse, saved you money, and without those cuts, your taxes will go back up to the 2000 level. Senator Obama doesn't call it a "tax increase," but your taxes under "President" Obama will increase -- significantly.

Senator Obama is willfully deceiving you and me when he says that no one making under $250,000 will see an increase in their taxes. If I were keeping score, I'd call that Tax Lie #1.

The next loophole involves the payroll tax that you pay to support the Social Security system. Currently, there is an inflation-adjusted cap, and according to the non-profit Tax Foundation, in 2006 -- the most recent year for which tax data is available -- only the first $94,700 of an unmarried individual's earnings were subject to the 12.4 percent payroll tax. However, Senator Obama has proposed lifting that cap, adding an additional 12.4 percent tax on every dollar earned above that cap -- and in spite of his promise, impacting all those who earn between $94,700 and $249,999.

By doing this, he plans to raise an additional $1 trillion dollars (another $662.50 out of my pocket -- and how much out of yours?) to help fund Social Security. Half of this tax would be paid by employees and half by employers -- but employers will either cut the payroll or pass along this tax to their customers through higher prices. Either way, some individual will pay the price for the employer's share of the tax increase.

However, when challenged to explain how he could eliminate the cap AND not raise taxes on Americans earning under $250,000, Senator Obama suggested on his website that he "might" create a "donut" -- an exemption from this payroll tax for wages between $94,700 and $250,000. But that donut would mean he couldn't raise anywhere near that $1 trillion dollars for Social Security. When this was pointed out, Senator Obama's "donut plan" was quietly removed from his website.

This "explanation" sounds like another one of those loopholes. If I were keeping score, I'd call this Tax Lie #2.

(updated) Senator Obama has also said that he will raise capital gains taxes from 15 percent to 20 percent. He says he's aiming at "fat cats" who make above $250,000. However, while only 1 percent of Americans make a quarter-million dollars, roughly 50 percent of all Americans own stock – and while investments that are through IRAs, 401Ks and in pension plans are not subject to capital gains, those stocks in personal portfolios are subject to capital gains, no matter what the owner’s income is. However, according to the US Congress’s Joint Economic Committee Study, “Recent data released by the Federal Reserve shows that nearly half of all U.S. households are stockholders. In the last decade alone, the number of stockholders has jumped by over fifty percent.” This is clear – a significant number of all Americans who earn well under $250,000 a year will feel this rise in their capital gains taxes.
Under "President" Obama, if you sell off stock and earn a $100,000 gain -- perhaps to help put your children through college -- instead of paying $15,000 in capital gains taxes today, you'll pay $20,000 under Obama's plan. That's a full one-third more, and it applies no matter how much you earn.