Obama gives specifics on his tax increases

Discussion in 'Politics' started by hughb, Aug 15, 2008.

  1. hughb


    August 15, 2008


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    Obama Details Raising Taxes on Gains, Dividends
    Plan Would Expand
    Payroll Levy on Some
    High-Wage Earners
    August 15, 2008; Page A4

    Democratic presidential contender Barack Obama sought to quiet critics by offering specifics about his tax plan, but his proposal to raise tax rates on investment income and expand payroll taxes is continuing to draw fire from some who say it will harm workers and the economy.

    See charts, speech analysis and video on the policy battlefronts
    Sen. Obama outlined a plan Thursday to raise tax rates on capital gains and dividend income from 15% to 20% for individuals and families making more than $200,000 and $250,000, respectively. He also detailed a plan to levy payroll taxes on earnings above $250,000 at a rate between 2% and 4%, though that increase wouldn't occur for at least a decade. Right now, payroll taxes, used to fund retirement benefits, are levied on income up to $102,000.

    Jason Furman, Sen. Obama's economic-policy director, said the plan would cut taxes to less than 18.2% of gross domestic product. "That's lower than the level of taxes when Ronald Reagan was president," he said.

    The proposed rates are below the levels many had expected, given Sen. Obama's campaign rhetoric. Nonetheless, critics said the plan would exacerbate an economic downturn and harm workers.

    "The U.S. economy is in a weak state. We've got a credit crunch, high oil prices...this is not the time to be raising anybody's taxes," said John Taylor, a Stanford University economist who is advising Sen. Obama's rival, Republican Sen. John McCain.

    "When the investment tax rate is higher it affects behavior because we see a retrenchment of companies paying dividends," said Bruce Josten, executive vice president of government affairs at the U.S. Chamber of Commerce.

    Dividends and capital gains lure investors to participate in the stock market, and their investment provides capital for companies to use to expand their business. A reduction in that capital could hurt business and the U.S. economy, Mr. Josten said. He said the business community also is concerned that Sen. Obama's broader tax plan would remove more individuals from the income-tax rolls, a situation that could lead to future tax increases on wealthier Americans.

    The Obama campaign called on former Clinton administration Treasury Secretary Lawrence Summers to defend Sen. Obama's plans. "At a time when the 10-year interest rate is in the three's, at a time when it is clearly lack of demand for products rather than the cost of capital that is inhibiting investment, the idea that a return to the tax policies of the 1990s would somehow damage the economy in a substantial way seems to me supported by neither theory nor evidence nor the longer-term history," Mr. Summers said.

    The Securities Industry and Financial Markets Association, a trade group, criticized the proposed investment-income tax increases as dangerous. "The next occupant of the Oval Office is going to face some tough choices on fiscal policy, but raising taxes on capital gains and dividends will only further endanger an already-weakening economy and punish the more than half of all American households that are invested in the stock market," said Travis Larson, a spokesman for the group.

    Both Sens. Obama and McCain promise to cut taxes for the majority of Americans. Sen. Obama would skew his cuts toward lower- and middle-income groups, and has said his plans could remove as many as 17 million individuals from the income-tax rolls. He would roll back some of President George W. Bush's 2001 and 2003 tax cuts and raise taxes on families earning more than $250,000. Sen. McCain's plan would benefit wealthier Americans because he has vowed to keep all of Mr. Bush's tax cuts in place.

    The Obama campaign has said that repealing the Bush tax cuts would boost revenue by $100 billion a year, including $15 billion from higher capital-gains and dividend taxes. That money is expected to help finance Sen. Obama's tax cuts and his health-care plan. His economic advisers said Thursday that by the fourth year of an Obama presidency they expect to save about $90 billion from ending the war in Iraq.

    Sen. Obama has long said he planned to raise rates on investment income and payroll taxes. But many assumed, based on the candidate's comments, that the rates might be between 25% and 28%. Mr. Furman, the campaign's economic-policy director, said the campaign had been using the 20% figure internally in its budget numbers.

    Bob Williams of the Tax Policy Center, an independent think tank in Washington, said there is no evidence that a higher capital-gains tax rate impacts long-term behavior. The biggest impact, he said, is over the short term, when investors try to realize gains before the increase goes into effect.

    Write to Deborah Solomon at deborah.solomon@wsj.com2

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  2. hughb


    This is what I've been waiting to hear. He is scaling the cap gains tax so that only people above the $200K threshold will have an increase. I HOPE I am understanding this correctly. My cap gains and wages from employment are below $200K, so I can now vote for Obama knowing that I'm not taking money out of my own pocket.
  3. I recall Clinton running for office on the promise of a middle class tax cut. Instead, he pushed through one of the largest tax increases in history. Why would anyone believe an obvious liar like Obama? He is clearly trying to minimize pushback on tax increases now before the election. Once safely in office, does anyone doubt he will sign whatever socialist tax plan Nancy Pelosi comes up with?

    Taking even more poeple off the tax rolls is a huge mistake. Already, roughy 50% pay little or nothing in federal income taxes. These are pretty much the same people who are clamoring for even more handouts from the government. Society begins to break down when one group gets the ability to use politics to help itself to the minority's wealth. We are becoming a third world country fast enough. We don't need Obama's Hugo Chavez econmic plan to speed it along.
  4. Although Obama might have an advantage on the economy, over a McCain that likely will keep an enormous defense budget and probably increase it too (it's more than half the world's total military yearly spending already), I do think he is losing bigtime now with the "giftwrapped" Georgia conflict sent "from above" to McCain.

    McCain was uncannily prepared and in tune with all the official US statements, as well as the well prepared Saakashvili. Remember also that McCain have visited Georgia, although separatists tried to shoot him down again when he was there in 2006. That might just make him very prepared, because if someone who were shot down once might not be ready for president, those who (almost) got shot down twice, certainly have what it takes ...

    Hopefully, General Wesley Clark can be a strong and useful asset for Obama - either as part of his proposed government or in the campaign itself. Seldom do we see someone of such personal integrity in politics, as General Wesley Clark, while having such public appeal and being a strongly uniting force. http://securingamerica.com/
  5. "Read my lips: no new taxes" is a now-famous phrase spoken by former American president and candidate George H. W. Bush at the 1988 Republican National Convention as he accepted the nomination on August 18. Written by speechwriter Peggy Noonan, the line was one of the most prominent soundbites from the speech. The pledge not to tax the American people further had been a consistent part of Bush's 1988 election platform, but its prominent inclusion in his speech cemented it in the public consciousness. The impact of the election promise was considerable, and many believe it helped Bush win the 1988 presidential election.

    Once he became president, however, Bush was pressured by Democrats and some Republicans to raise taxes as a way to reduce the national budget deficit. Bush refused many times but was making no progress with a Senate and House that was controlled by Democrats. Bush later agreed to a compromise in which he worked with Congressional Democrats to raise several taxes as part of a 1990 budget agreement. This reversal caused great controversy, especially in the more conservative wing of the Republican Party. In the 1992 presidential election campaign, Pat Buchanan made extensive use of the phrase in his strong challenge to Bush in the Republican primaries. In the election itself, Democratic nominee Bill Clinton, running as a moderate, also pointed to the quotation as evidence of Bush's untrustworthiness, which contributed to Bush losing his bid for re-election.