Zero Tax Relief From Obama

by Mike on September 10, 2008

in Economy,Election 2008,Politics

Even though there isn’t a soul in America that believes him, Barack Obama has been running around the country claiming to support a tax cut for the overwhelming majority of Americans. With that in mind, I was happy to see this piece by Newt Gingrich and Peter Ferrara in the Weekly Standard on taxes.

Gingrich and Ferrara argue that most of Obama’s “tax cuts” are for people who don’t actually pay taxes thanks to the low tax policies of President Reagan, President Bush, and Gingrich’s Congress.

The merits of Obama’s plan are of course debatable even though the plan is misguided, but what people need to be aware of is that Obama’s plan does not reduce the amount of money taxpayers are forced to send to the government.  Under Obama’s plan, those who actually pay taxes will continue to pay through the nose while those who don’t will receive even more money they did not earn.  You could call it lipstick on a pig, but I’d rather call it That 70s Show.

{ 13 comments… read them below or add one }

dare3000 September 10, 2008 at 9:46 pm

What’s interesting is you get your info on Obama from Newt Gingrich. At least you’re unbiased and willing to look things up yourself (sarcasm). Ok, so I read Ginrich and Ferrara’s article, then I went to Obama’s website. I assume you didn’t do the latter, so let me inform you: Obama proposes a $500 per person, $1000 per family tax credit.

Who are these people who don’t pay taxes? To let you tell it, only those who aren’t paying taxes (and I dont know who the hell these people are) will get the credit (which is strange because it is for working families, and working families are TAXED), and those who “actually pay taxes will continue to pay through the nose”. What? Huh? It’s this simple: do you make over $200,000? No? Then you get a tax cut/credit.

But it really isn’t about that is it? What this is really about it this… whatever a Dem says is a lie, and only the Repubs are truthful (HAHAHAHAHAHA!!!!) You’re biased for the right (as you say in your title), and you’re just waiting for Newt to tell you what you want to hear.


Mike September 11, 2008 at 7:24 am

“I assume you didn’t do the latter, so let me inform you: Obama proposes a $500 per person, $1000 per family tax credit.”

What’s even more interesting is that you don’t understand the difference between a tax deduction and a tax credit. A tax deduction allows taxpayers to reduce the amount of their income subject to tax, thereby decreasing their tax liability. A tax credit is a subtraction from the tax liability that is determined after taxes are calculated. When the tax credit lowers tax liability beyond zero, the person gets a “refund.” This is true even when they have no tax liability at all.

You can call it a tax credit all you want and the code certainly does. But as Gingrich correctly observes, that is nothing more than a handout disguised as a tax cut for most of the people covered by Obama’s plan.

You can laugh all you want but you can’t change facts. Maybe you should take an economics or tax course before getting your info from The One’s website.


dare3000 September 11, 2008 at 9:09 am

Ok. Well first off thanks for the respond. You’re right. One should learn about the distinctions between tax credit and tax deduction before they get into any politicians tax policy. I have in fact taken an economics course (@ Georgia Southern U) and I got a B. Whatever. For the sake of our discussion I brushed up on the credit/deduction distinction. Here’s what I found:

“A tax credit lowers your tax bill dollar for dollar. A deduction shaves money off your taxable income, so the value depends on your tax bracket. If you’re in the 25% bracket, a $1,000 deduction lowers your tax bill by $250. But a $1,000 credit lowers the bill by the full $1,000, no matter in which bracket you are.”

So there you have it. You (and Newt) can call it a “handout” all you want but in the end it does exactly what the average working American wants it to do: decrease the tax burden for the middle class by a set number ($500 – $1000). For those who pay less than $500 – $1000 in taxes, they won’t pay any taxes and will even get more back. This bothers you? Why?

BTW, I’m not laughing at the tax issue. But it is funny when one gets there info from biased sources. It’s like they have no interest in objective facts (though they may claim they do). And I don’t get this “The One” nickname the right has for Obama. The whole messiah complex is an attribute added by the right, not a legitimate issue. Sure, every politician is going to “save America” or “clean up Washington”, but that’s standard procedure. At least when McCain is called McSame, there’s a voting record (objective facts) to support that.


Sal September 11, 2008 at 1:57 pm

The issue is that it is NOT a tax cut when you don’t pay taxes — it is redistribution of wealth, or welfare for workers. The truth is, the money belongs to the people of this country who work hard. A middle-class tax cut is a good idea, but the tax credit, while giving people more of their money back and not a bad thing per-se, is a problem in that it takes from one income class (the rich) and gives to other income classes. The problem with this is that eocnomically it is a disaster. In truth, there are 44-million people who don’t pay income taxes. Obama’s tax credit will affect 150 million, so just under 1/3 of all the people who receive this “cut” will be benefits of redistribution of wealth.

People often derride the rich and feel that they don’t pay their fair share. This is not the case, however, as the top 5% of wage earners currently pay 60% of taxes. The wealthy do pay more of their fair share, and when you raise their taxes, one of three things happens:

1) The wealthy will create less jobs (it is the rich who start companies and create jobs) or be forced to cut current jobs from their businesses.
2) The wealthy will buy less luxury goods. (i.e. no new private jet). This may seem inconsequential until one thinks of who is making those private jets, who is building the parts, etc. It is the working person who suffers more whenever the wealthy’s taxes are raised.
3) Many small businesses will have their taxes increased and therefore have less money.

#3 deserves even further discussion. Most small businesses in this country are S-Chapter corporations (I happen to work for one). These corporations are owned by single individuals who file their personal tax along with their business tax. So while the company may gross $1M in revenue a year, after salaries, expenses, etc., there may only be a net profit of $50-100k for the small business owner trying to get his business going. However, in the tax law, the $1M is taxed as if it were the owner’s income, even though 95% of that income is going to employees salaries, rent, etc. These people get soaked every time there is a supposed tax hike for the “rich”.

Finally, while he is offering a tax credit, it is a smokescreen. In reality, most people’s taxes (including working class) will go up. This is because Barack Obama plans to let Bush’s tax cuts expire. So while he is adding a $1000 tax credit, people’s rates will go up. The 10% tax bracket will be eliminated, the middle class tax brackets will go up by 3% at each bracket, and the wealthy tax bracket will go up by 5%. Additionally, the marriage penalty will return, the death tax will be reinstated, and more Americans (by virtue of the new tax credit) will be affected by the Alternative Minimum Tax (AMT). So in the end, most of the middle class will be soaked by higher taxes, while those who don’t pay taxes will get some money in return.


dare3000 September 11, 2008 at 2:33 pm

Thanks for the reply. Well written and well organized. I’ll gonna have to do more research and mull this over, but this is definitely food for thought.


Ryan September 11, 2008 at 3:33 pm

Building on Sal’s point, there are some who believe that philosophically big business and corporations do not even pay taxes in the first place, since every tax increase is passed on to the consumers through higher prices, hence they absorb the increase. Since “rich” people run those businesses and corporations, they too will find a way to absorb the shock. That can only mean higher unemployment or the worst of all scenarios: a mass exodus of domesetic and international corporations out of America and into more tax-friendly nations. Why wouldn’t they go if pushed too hard? Lib policies can try to nail them while they’re here, but no one can make them stay here.

The Lib view on taxes is viewed often times through the prism of class struggle and populist slogans. They don’t understand economic fundamentals like the business cycle or the fine-print subtleties like Sal has demonstrated above. If they do understand those fundamentals, yet are still proposing debunked Obama-style populist Keynesian dribble, then these Libs leave the realm of the ignorant and enter the realm of the dangerous since in that case, power becomes more important than truthfulness with economics or even sound policy.


dare3000 September 11, 2008 at 3:48 pm

Hate to double post, but I wanted to state my appreciation for your sharing your knowledge with me. Don’t get me wrong though, I have problems with your economic claims, I just didn’t have time to express them all (I was and still am in class right now).

I’ve noticed your buzz phrases. First one up: “redistribution of wealth, or welfare for workers” Oooooooo scary. Don’t want that… we’ll just be commies! I don’t know who exactly these 44-million people who don’t pay taxes are. Why aren’t they paying taxes? Are they extremely poor, old? What’s going on there? I need to know more. The idea that redistribution of wealth as such is a bad thing is an idealogical position, often dogmatically by the right. I don’t buy it.

“the top 5% of wage earners currently pay 60% of taxes” that’s an interesting stat. 5 < 60 after all. Then I thought: these top 5% are holding what% of the wealth. For instance, if the top 5% hold 90% of the $$$, 60% is getting off easy wouldn’t you say? Bush’s tax cuts for the wealthy, supposed to trickle down to the rest of us, how has that worked out economically? I mean, what more evidence do we need that republican policies are flawed than the hard hitting evidence of REALITY? (are is Bush not republican enough?)

To the numbers!
1) the wealthy are already shipping jobs overseas. A tax incentive to keep jobs here (which Obama and McCain are for, I think), would be more effective than a broad tax cut, in terms of creating jobs.
2) Boo-fucking-hoo. Sure, maybe the jacuzzi and private jet industry might suffer. Somehow I think they might find other things to make.
3) Small businesses getting hurt… that’s a toughie (and McCain’s main talking point). It does deserve further discussion.

So you own a business. The business makes $1M. After all the employees are paid ect. you pull down $50-100K. You mean to tell me you’re treated as if the $1M is in your personal checking account? That seems strange. I mean, if you pay a guy, and that guy is taxed, essentially the same money in taxed twice, and that’s not right. Why not just say you make $50-100K and qualify for a cut? If what you say is true (do I understand you right?), then I agree that’s a fucked up situation. But I don’t necessarily see this as connected to Obama and his tax policy. I still think the tax credit is a good idea, but more provisions need to be added to protect the small business owner. I’d like to see what Obama (and an objective third party, so that excludes Newt and the Repubs) says about this very situation.

And as far as the brackets raising as you say, I won’t dispute you because I don’t know for sure. But I’d love some citations.

Once again well said though man.


vijtable September 11, 2008 at 3:59 pm

@ Sal
Regarding the source, check out the Tax Foundation ( which has non-partisan tax analysis. I think the Weekly Standard article got a few things wrong.

Regarding your point, I think one thing that is overlooked is that there is a critical tipping point in the value of $ to a person.

To the lowest few percent of the population, every dollar is valuable but must be disposable, and retirement doesn’t matter. Children are born with nothing, and have very low economic mobility because necessary resources are not put remedying the situation. Here, wealth ought to be redistributed, simply because it will likely lower overall costs to society (emergency room visits, homelessness programs, and crime).

To the middle class, most income is tied up in large-scale “American dream” investments – houses, cars, and healthcare costs. Disposable income exists, but is limited, and is typically shunted away to education for children. I studied at a private university, and was part of an advisory committee there. It was found that the middle class students (and families) were hardest-hit by economic pressures. The student population was a reverse bell-curve, wealth-wise. The poorest students at universities are typically given enough to support their studies, and the riches typically are able to avoid needing financial aid, without much economic stress. The middle class is leaning on loans, and the students are the most stressed. The middle class is burdened by lots of “locked up” money, so while they have significantly higher incomes, the middle class lifestyle means there is burden from taxes. Since middle class families pay more in taxes than the rebates/credits give back, they are simply getting their own money credited to them. No wealth redistribution, simply reduced burden, which is good.

Given the state of the deficit and debt, and the fact that the VALUE of each dollar is dependent on the economic health of American society. Right now, since the non-wealthy are not spending as much on disposable goods, and people are defaulting on mortgages and loans, the value of the dollar is falling. If the taxes on the wealthiest 2-5%, with the most disposable income, will help secure the strength of the dollar, that ALSO benefits everyone.

Finally, small businesses: you’re wrong. See the above website. Obama wants to eliminate capital gains taxes on small businesses. McCain wants to cut the rate across-the-board from 35% to 25%. Obama does better for small businesses than McCain, and McCain’s lower tax rates benefit high-income corporations the most.

I look forward to your responses.


vijtable September 11, 2008 at 4:07 pm

@ Dare3000

“You mean to tell me you’re treated as if the $1M is in your personal checking account? That seems strange.”

No. I have several friends who own or work for small businesses. Costs for employees and such are indeed subtracted from the $1M the company pulls in. Moreover, since all companies are incorporated with the IRS, the company has separate books from the owner of the company. The owner literally pays him or herself, meaning that the company is treated as a separate entity.

@ Ryan

Trickle-down economics has so far not proved to help the people, just the stock market. Under trickle-down (or laissez-faire) schemes, wealth and income disparities grow, not shrink.


Mike September 11, 2008 at 4:10 pm

I think the last two comments prove me correct in that the merits of Obama’s plan are debatable, but both miss the point. Obama grossly overstates his plan as a tax cut when the benefits go to people who do not pay taxes.

I think the last commenter makes a fair point about the relative value of tax rate reductions to lower income people, but that also misses the point that Obama takes money from people who earned and gives away to people who did not earn it. The value of such a scheme is debatable, but Obama’s language is not. It’s a spending increase, not a tax cut.


Mike September 11, 2008 at 4:16 pm

I must add that claims of bias (and we proudly admit our conservative worldview here) are quite rich from a person who uses a term found exclusively in left-wing fountains of misinformation like DU and Kos (“McSame”) and obtains his or her information from the Obama campaign website.

As for voting records, McCain opposed Bush policy on spending levels, interrogation techniques, troop levels in Iraq, global warming, stem cells, and the marriage Constitutional Amendment and more. How many times has Obama ever broken with his party to support a Republican idea? Answer: Zero.

The fact is every news source has a slant or perspective and everyone’s job is to try and figure out which ones are right to which degree.


vijtable September 11, 2008 at 4:23 pm

@ Mike

Regarding this comment: “Obama takes money from people who earned and gives away to people who did not earn it.”

Do you mean from the richest to the poorest? Are you saying that the poorest should not have wealth redistributed to them? I ask for clarification purposes. If you think this type of redistribution is a bad thing, I understand, though I disagree.


Mike September 11, 2008 at 4:27 pm

“Trickle-down economics has so far not proved to help the people, just the stock market. Under trickle-down (or laissez-faire) schemes, wealth and income disparities grow, not shrink.”

Disparities do indeed grow, but that misses the point. The 1980s and 1960 demonstrated that tax rate reductions led to increased income and prosperity for all brackets. The goal of economic policy is not to ensure that everyone makes the same or close to the same, but that people can keep what they earn and have incresed opportunity to move to a higher income bracket if they are talented and/or motivated enough. “Trickle down” allowed that to happen.


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