Higher Taxes on Top Earning Americans
Senator Obama is a big believer in our progressive tax system – and he is not afraid to hide that. So one of the first things Obama is set to do is letting President Bush’s 2001 and 2003 tax cuts to selectively expire. He also advocates increasing the income cap on payroll taxes. This would essentially be a huge tax increase for taxpayers earning between $97,000.00 and $250,000.00, which goes against Obama’s prior commitment to not raise taxes on individuals making less than $250,000.00. Although higher taxes on the rich is a popular thought for many liberals, you cannot expect to only tax the rich and cut taxes for the poor. The American public is not likely to support unbalanced tax increases and this could harm his chances in the general election.
Close Corporate Loop-Holes
Another major component of Obama’s tax plan is to close hundreds of corporate “loop-holes” that allow massive corporations to questionably reduce their tax liability. “Instead of having all of us pay our fair share, we’ve got over $1 trillion worth of loopholes in the corporate tax code,” he claimed. “This isn’t the invisible hand of the market at work. It’s the successful work of special interests.” This plan would be highly efficient at creating new revenue for the federal government, but at what cost? Huge corporations are already moving factories and offices to countries with cheaper labor and more favorable corporate taxes. If the tax rates increase too much, then more corporations would likely move out of the country and it could result in thousands of lost jobs.
Senior Citizen Tax Breaks
Although it seems like an attempt to get the attention of the “senior voters” and the AARP, Obama is hoping to provide relief to millions of seniors struggling to make ends meet. His plan would eliminate federal taxes on seniors making less then $50,000.00 per year, which would account for $7 million dollars in total relief. It seems quite unlikely that the country would get behind this tax plan. I also have my own reservations – what about single mothers making less than $50,000 per year – that I expressed in a previous entry.
Make Work Pay Tax Credit
With his Make Work Pay tax credit, Obama is hoping to encourage Americans to take control of their lives, while providing tax relief to both low and middle income taxes. “I’d reward work by providing an income tax cut of up to $500 per person – or $1,000 for each working family – to offset the payroll tax that they’re already paying,” claimed Obama. “Because this credit would be greater than their income tax bill, my proposal would effectively eliminate all income taxes for 10 million working Americans.”
Capital Gain Tax Increase
Obama’s desire to increase the Capital Gains rate is probably the biggest actual increase of his tax plan. The current tax rate on Capital Gains is 15%, and Obama hopes to raise it to 28%. But although the Capital Gains tax rate is much lower today than it was a decade ago, it is being levied on a lot more people. Investing is not only for the rich, as there are millions of middle income Americans investing in stocks, retirement accounts, and mutual funds. In a time of a looming economic recession, we should be encouraging sound investment and savings strategies. Raising the capital gains rate is not going to do that.
Mortgage Relief for Homeowners
“Ten of the country’s largest mortgage lenders spent $185 million lobbying Washington so they could keep engaging in destructive practices,” claimed Obama. “And they got what they paid for. To help fix this problem Obama wants to create more accountability in the mortgage industry. In addition, he intends to pursue more tax breaks for current homeowners. Specifically, Obama announced intentions to “create a 10 percent universal mortgage credit to provide homeowners who do not itemize tax relief.”
Because it is a credit, individuals claiming the standard deduction would have access to it. Currently, mortgage interest is a deduction that can only be claimed by itemizing your deductions on your tax return. The credit would provide about $500 to 10 million homeowners in this country, mainly for individuals making less than $50,000 per year.
Revamp the AMT
Although Obama voted “nay” on repealing the Alternative Minimum Tax (AMT), he does support a revamp of the tax. The specific details of his plan are a bit hazy, but Obama has claimed he would like to index the tax according to inflation so that it does not affect middle-income Americans. However, with dozens of social plans that cost billions of dollars to operate, the idea of reducing a tax that generates so much revenue for the government seems unlikely.
American Opportunity Tax Credit
One of Obama’s more popular tax views is to help make higher education more affordable for Americans by creating a credit to reimburse taxpayers for the costs of obtaining a college education. According to his plan, the credit would reimburse taxpayers on the first $4,000.00 they spend on a college education, and will cover two-thirds of the cost of attending a public college or university.
Immigration Reform and Undocumented Immigrant Taxes
Obama wants to reform the way the federal government deals with undocumented immigrants. Obama’s plan does have tax consequences, as it would not only require illegal aliens to file tax returns and pay income taxes, but would also require them to pay back taxes and the associated penalties and interest. If this idea became reality, it could account for millions of dollars in additional federal revenue. And, by not including tax amnesty in his immigration reform, Obama preemptively “plucks” a feather from the anti-immigration reform movement. It also preemptively stops American citizens from lobbying for similar treatment for their own unfiled tax returns and IRS back taxes.