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I've always said that you can't separate taxes and spending, they're like salt and pepper. A candidate's tax policy should influence their spending, and vice-versa. Well, I'm going to break that rule today. I'm going to overview Barack Obama's tax proposals, just taxes, without the spending. I'll go over spending later. Please forgive me, I have broken my own rule. Now that we're all over my bending of my own rules, let's get down to business. Taxes. One of the most hated words the government uses, no one likes to pay taxes and nearly 40% of the country gets the luxury of not paying any income taxes. Yet those citizens are the ones that will benefit most from Obama's tax plan. Think about that for a second, people who don't pay taxes will benefit most from Obama's tax plan. The Obama campaign continually touts their tax cuts for 95% of Americans. The Tax Policy Center has already proven that number to be incorrect, around 80% of all tax units will receive no increase, not 95%. On top of that the Obama camp has redefined the word "cut." Cut usually means to reduce or to shorten the amount. Most people interrupt a tax cut to be a slashing of the rate they pay. However, Obama's definition is slightly different. Obama doesn't actually cut any rate (with the exception of income tax for senior citizens) he simply hands out government checks known as tax "credits." Think of tax credits as mail-in-rebates, you still pay the same rate, you just get a check a few months down the road. Obama's tax "cuts" consist of seven tax credits, they are... -$500 tax credit ($1,000 a couple) to "make work pay" that phases out at income of $75,000 for individuals and $150,000 per couple. -$4,000 tax credit for college tuition. -10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies). -"Savings" tax credit of 50% up to $1,000 -An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.
-A child care credit of 50% up to $6,000 of expenses a year. -A "clean car" tax credit of up to $7,000 on the purchase of certain vehicles. All but the "clean car" credit are refundable, meaning those who don't pay income taxes are eligible for the tax credit. Think of it like this, you and six of your friends are sitting around your room when you ask, "anyone want a pizza, we can all chip in and get one." All your friends say "yeah sure, let's do it." Unfortunately your bum friend Adam is there and he doesn't have any money, but being the great friends that you are everyone assures Adam that he can have a few pieces despite his lack of a contribution. When the pizza arrives Adam answers the door, hands the delivery guy the money and then eats 75% of the pizza. Everyone is furious at Adam because, despite not contributing anything to the cost of the pizza, he ate almost all of it. Obama's plan follows the same logic. By the way, the cost for all of those credits would rise over the next ten years by $647 billion to a staggering $1.054 trillion. Obama pays for his "Robin Hood" plan by taxing the rich to death. $250,000 is the magic number for Obama, that's where he separates middle class from the wealthy. Under Obama's plan those making $250,000+ a year will see the following increases... -Income tax rate from 35% to 39% -Payroll tax increase - not a rate increase but the cap will be eliminated, meaning if you make more than $250,000 all of your income will be taxed (before it was all income up to $102,000) -Capital gains tax increase - From 15% to 20% -Estate tax - 45% for estates above $3.5 million -Corporate tax - Close loopholes and keep at 35% (closing the loopholes is effectively a rate increase) To put this in simple terms Obama will take from the rich ($250,000+/year) and give to the poor/middle class (normally those who make $85,000 or less a year). So how does the rate increase on personal income effect small business? Great question, and I've got a great answer...it's going to suck to be a small business. Obama and Joe Biden have made it a point to pull the statistic out that 95% of small businesses make less than $250,000 a year. While that's true it's not all too important. The important statistic to look at is 60% of all small business income falls into the $250,000 bracket. Those larger small business are the ones employing the majority of workers. S Corporations (small businesses) that make more than $250,000 a year will see a rate increase from 35% to 39.6%. However if you're a sole proprietor it's even worse. A sole proprietor is
someone who is self employed and their business has no separate existence from their owner, under Obama's plan their tax rate would range from 50.3% to 54.9% (it depends on the payroll tax). The reason their tax rate is so high is because they have to pay income tax and self employment tax (social security and medicare), combine the two and you've got a tax rate of up to 54.9%. Under McCain's plan their rate would stay at 37.9%. The other important point is that Obama-Biden say that small businesses will thrive under them. That might be correct until they reach an income of $250,000 or greater. What's the point of promoting and supporting small businesses when you're going to tax them at near historic heights when they reach a milestone of income? It's taxing success. Obama creates a disincentive for innovation and growth. What small business owner would purchase another small business or expand their own when 40% of their income would be taxed? Especially when they are giving it a government that has a 9% approval rating. Also under the header of business is corporations. Obama would have a field day taxing corporations. He concedes that our corporate tax rate is the second highest in the world yet he says no corporation actually pays that amount because of loopholes in the code. Obama will fix those loopholes yet keep the rate at 35%. So is good or bad that the rate is so high? Closing the loopholes and not lowering the rate accordingly is effectively a rate increase. Obama would also increase taxes on corporation's overseas profits. Currently if a business has a foreign subsidiary and they bring those profits back to the states, it's taxed at the corporate rate of 35%. They can choose to defer those profits and not bring them back, thus avoiding the taxation. Obama would repeal this, taxing businesses for profits made overseas whether they're brought back or not. Japan has a similar taxation in place, yet they are considering repealing it. There was a bill passed a few years ago that experimented with another solution to foreign profits. It was called the 2004 American Jobs Creation Act, it taxed foreign profits brought back to the states at 5.25%, instead of the corporate rate of 35%. The results were astounding. An estimated $362 billion flooded back into the United States through businesses. This allowed companies to invest that money here instead of abroad. It resulted in government revenues of $18 billion. The lower tax rate worked because corporations finally brought the money back. Before they would reinvest it in the foreign country to avoid the high tax. And finally energy taxes. Despite the falling price of oil, higher government taxation still has the ability to increase prices at the pump, and Obama's plan does just that. For starters Obama wants a windfall profits tax that would cost the oil companies $15 billion. I can guarantee you that cost will be trickled down to consumers. The energy industry is an ever changing field that is extraordinarily expensive, oil companies save as much money as possible so they won't go bankrupt in the future. We tried a windfall profits tax before, and it failed. Domestic oil production went down, imports went up; the exact opposite of what Obama has promised. What makes Obama think that will change? The two other tax increases effect more than just the energy industry. He'll raise the dividend rate from 15% to 20% and the corporate tax will stay at 35% with closed loopholes.
He also wants to institute a cap and trade that will force oil companies to pay for the emissions they produce. This is an excise tax, and like most excise taxes this too will be paid by the consumer in the form of higher prices. A major difference in energy policy between Obama and McCain is the ethanol tariff. Currently ethanol imported into the States is subject to a 54 cent tariff. McCain wants to repeal that tax, Obama wants to keep it in place to support corn based ethanol. The problem is corn based ethanol is nonsensical; it only has an energy ratio of 1.3-1, meaning it barely outputs more energy than it takes to create. Sugar based ethanol which is produced by South American countries, namely Columbia, has an energy ratio of 8-1, it's very energy efficient, yet it suffers from a large tariff. If Obama is so concerned with energy independence and clean fuels he should promise to lift the ethanol tariff. The main theme of Obama's tax policies can be simplified to one statement; the rich should pay more because they have more to pay. As Joe Biden put it, Obama supports tax cuts (actually tax credits) to the middle class and small businesses "not because it's fair, it's what makes the economy grow." That might be true, but once those middle class families and small businesses hit the $250,000 mark, that growth suddenly comes to a halt.
Jacob Bodnar is the host and producer of the weekly conservative podcast, The Current Podcast. His shows and columns can be accessed at http://www.thecurrentpodcast.com
Article Source: http://EzineArticles.com/?expert=Jacob_Bodnar
==== ==== Obama Debt Ceiling Letter FINAL Free download now!!!! Free download http://uploading.com/files/ac3f9376/Obama-Debt-Ceiling-Letter-FINAL.pdf/ ==== ====