Obama’s Tax Reform

May/09/2008 22:55PM
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Obama wants big change. He wants to give the middle class tax relief. What is the middle class? How does he define this group?

The latest tax data is for 2005. Hard to believe, with all the modern technology today, the most current facts on taxes in this country is for 2005. Surprised? Probably not. 

Let’s start with the bottom 50% of the taxpayers. Are they the middle class? If  so, they paid 3.07% of the total income tax paid in 2005. Must not be them. Are they going to be the benefactors of a tax increase? Their average tax rate is 2.98% with many getting money back, not paying anything. Are we going to cut their taxes?

The top 1% of the taxpayers paid 39.36% of the total revenue in 2005. The top 5% paid 59.67%. Is Obama’s so-called middle class between that and the lower 50% who only pay 3%? Let’s go another 5%, the top 10% paid 70.30%. The top 25% paid 85.99%. The top 50% paid 96.93%. So half of the American people paid 97% of the taxes paid in 2005. 

Perhaps I’m confused, but what is Obama trying to do? It doesn’t seem like he can redistribute income much to the bottom 50% of Americans since they only paid 3% of the taxes. What they are paying in higher gasoline and food costs are far greater than any tax breaks he can give them even if they go to zero. 

Is the plan to grow government at the expense of taxing the top 50% of Americans who now pay 97% of the taxes? That, and increase entitlements to the lower 25% who are paying no taxes or collecting from the government? Probably so.

How did those top tax payers earn all that money? By investing in American’s corporations and enjoying higher share prices and dividends and interest on bonds. By investing in America and earning interest on T-Bills. By putting money in banks that can make bad loans for sub prime mortgages. By building businesses that employ middle class workers.

If the incentives to do all of this goes away or is severely minimized, what happens?

I can only speak for myself. I will change my investment strategy to insure I don’t give President Obama one cent. I can do this and not suffer one iota. The companies I have been investing in will lose that capital. I will no longer pursue companies that pay dividends. I will double down on munis and other sheltered investments. I presume many Americans will make similar changes. When the economy takes a hit, I’m guessing it will be Omama’s big supporters who will be out of work. Why is this a good idea? I will do much of this between election and inauguration while we still have a fair and reasonable tax basis.

I would guess if we had the 2007 tax data it would show the top 50% paid 98% and the bottom 50% 2%. This is just based on the trends for the past 25 years.

So, once again we are told by Obama and others that the working people in America are paying too much in taxes and the wealthy are getting off too easy. Is this borne out in fact? No. But, it gets votes and why should facts and votes be confused by Obama who only cares about the votes, not the facts.

Is this any different than the myths that we are fed by office holders and the media. What responsibility does the media have to sort out the difference so we can have better tools to challenge statements that aren’t factual. Or, does it depend on the fact? If the media likes the lie, why not embellish it?

If we are going to change how things are done and  said, will it be bloggers who do it down the road? Will Americans begin to get their news from sources outside the mainstream media? They are getting them somewhere else now. All three major networks, the NY Times, the Washington Post, etc. are all losing share at a remarkable rate. Cable news is picking up some.

Can anyone tell me how candidates can get away with big picture platforms that promise nothing and are based on myths?

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