Obama's plan for taxes

Discussion in 'Politics' started by hughb, Jun 28, 2008.

  1. hughb


    What Obama means by tax the wealthy
    Here's a closer look at how the Democratic candidate defines well-off for different households, and what his proposals will mean for them.
    By Jeanne Sahadi, CNNMoney.com senior writer
    Last Updated: June 28, 2008: 9:52 AM EDT
    NEW YORK (CNNMoney.com) -- Most voters are aware that Barack Obama wants to raise taxes on high-income taxpayers if he's elected president in November.

    But what does the Democratic candidate mean by high-income? Who'd be affected and how? While the Obama campaign must still settle on more details about their plans, outlines are starting to emerge.

    To start, Obama frequently cites $250,000 as the line between those who would be subject to higher taxesand those who wouldn't.

    Indeed, under Obama's tax plan, married couples with at least $250,000 in gross income are likely to see their taxes go up if Obama is elected president.

    But what about single filers? The line for them would likely be about $200,000, according to an Obama adviser.

    Those groups could end up paying anywhere from several thousand dollars to tens of thousands of dollars more to Uncle Sam than they do now, according to estimates from the Tax Policy Center.

    From income to Social Security to estates, we take a look at four areas where the high-income set and the very well off may be subject to a bigger tax bill in an Obama administration.

    Income taxes
    Obama would restore the top two income tax rates to their pre-2001 levels of 36% and 39.6%. Currently they're 33% and 35%.

    Obama's proposal would also reinstate some limitations on how much of a given deduction or personal exemption high-income taxpayers may take.

    However, not everyone in the top two brackets would necessarily be affected by the rate increase. Much depends on whether they've been subject to the Alternative Minimum Tax (AMT) in the past.

    You're supposed to calculate your tax liability under both the regular income tax code and the AMT. If your bill under the AMT is bigger, you must pay that.

    The Obama rate increase would certainly narrow the spread between the two - since the amount owed under the regular code would go up. The question is would the amount you owe because of the increase exceed your AMT bill.

    "Until the regular tax starts exceeding the [AMT bill], you won't have an increase," said John Battaglia, a director in the private client advisors practice of Deloitte. "But if people are deep into AMT, it wouldn't matter."

    For example, if the rate increase would mean you owe $2,500 more under the regular code, but your AMT bill is normally $5,000 more than your regular bill, you would still pay the AMT.

    Payroll taxes
    In addition to wages up to $102,000 - the current cap on salarysubject to the payroll tax, which funds Social Security - Obama would also tax amountsover $250,000.

    In other words, income between $102,000 and $250,000 would be protected.

    Obama's stated goals are to better fund the Social Security program - which faces a long-term shortfall - and to make the system more progressive. Currently, the vast majority of Americans pay the Social Security tax on 100% of their income because they don't make more than the $102,000 wage cap. By contrast, very highly paid taxpayers only pay Social Security tax on a portion of their income. People who make $204,000, for example, only pay the tax on 50% of their income.

    The rate at which salary is taxed for Social Security is 12.4% (half of which is normally paid by employees and half by their employers).

    Obama hasn't saidwhether the money from wages and salaries over $250,000 would be taxed at the same rate. If it were, the person making $300,000 in gross income - $50,000 above the $250,000 watermark - would pay an additional $3,100 into the system annually (6.2% x $50,000).

    We also don't know whether the benefits promised to the highest income workers would go up as a result of their paying more into the system.

    "Those are details that Senator Obama would want to work out on a bipartisan basis with Congress," an Obama adviser said.

    That lack of specificity concerns some tax experts. "If Obama is hinting that those making more than $250,000 would pay a higher payroll tax rate ... it would fundamentally change the way Social Security operates and run the risk of making the program look less like social insurance and more like welfare," Tax Vox blog editor Howard Gleickman wrote for the Tax Policy Center.

    Investment income taxes
    Long-term capital gains used to be taxed differently than dividends, which were subject to one's top income tax rate. Under the 2001 and 2003 tax cuts, gains and dividends are treated equally. Currently the most one would pay is 15%.

    Both rates are scheduled to rise by 2011 - long-term gains to 20% and dividends would once again be taxed a taxpayer's top income tax rate for dividends.

    Obama would continue to treat gains and dividends equally and would keep the current rate in place for everyone except high-income households.

    He hasn't specified how high he'd like to make the rate, but observers expect and Obama himself has virtually said that the new rate likely would fall between 20% and 25%.

    Estate tax
    Finally, Obama's proposals to tax wealth are not only defined by income levels.

    When it comes to family wealth, for instance, Obama favors maintaining the estate tax, which is scheduled to be repealed in 2010 for one year. But he would limit its reach.

    Obama would freeze the estate tax exemption amount at $3.5 million - up from its current $2 million level and the $1 million level it's set to revert to in 2011. He would also keep the current top rate of 45%, which is below the 55% it is set to revert to in 2011.

    First Published: June 27, 2008: 6:19 AM EDT

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  2. hughb


    Last week in the WSJ Obama was quoted as saying that nobody who earns under $250K would get a tax increase, and he specifically mentioned cap gains in addition to income.

    I need some clarification on that. I don't make $250K in cap gains and income in any year. So even if he repeals the Bush tax cuts, does that mean my cap gains tax bill stays the same? That was the implication, hell, not even an implication, he said that people under $250K will not get a tax increase.
  3. maxpi


    Some people analyzed Obama's tax thingys, they say it's rhetoric, there isn't enough money there to make a difference in anything.....

    The guy is the farthest left of 100 Senators by his voting record, that's all you have to know about Obama, whatever he says is pure bullshit because nobody that far left is ever going to say what they really intend to do.....
  4. Here's the sneaky truth. Your tax increase will come in the form of higher prices for goods and services. And the media will attempt to focus your ire on those who do not feel the pinch and pain. The question I would pose to you is this, will you let the various press outlets focus you onto their enemy of the moment? Do you not understand the gap between most of the haves and have nots is not just a function of taxation?

    Regardless of who wins, there is a major increase in the debt at hand. No matter who wins, gas will be over $5 a gallon and no political party can sptop that fact. So many average Americans have built their lives around the auto. Purchases are generally made based on desire versus practicality. The, that's what I want to buy mentality MUST change. The numbers for new car purchases is going to go down. And you'll be told that it's a downturn in the economy. I would better characterize it as a change in the buying patterns of the masses.

    Couple that with the tightness of credit and you'll see slower growth everywhere. Anytime the public starts to spend and shop within their means it's a bad thing as far as the media, and sometimes Wall Street, are concerned. :)

  5. Yannis


    IMAO: Showing Solidarity with Obama

    "Obama supporters are starting to get Ronulan weird: Some of them are legally changing their middle names to Hussein to show solidarity with Changey McHoperson. If his cultish supporters want to show solidarity where they think Obama may be attacked, here are a few other suggestions:


    * When important family matters needs your decision, vote "present."

    * If you're ever caught in a lie, blame those most devoted to you for the error.

    * Never do anything significant and demand a huge promotion at work.

    * Whenever anything goes wrong, immediately throw one of your friends or family members under the minivan.

    * Look down on others despite being a completely worthless person yourself.

    * Hang out with racists and other scumbags until challenged on it and then claim ignorance of the controversy.

    * Send your friends to attack the military service of opponents.

    * Insult people with real principles behind their backs.

    * Change your positions daily to what seems most popular at the time. Back this up by generally making mealy-mouthed, non-statements about important issues.

    * Marry someone angry and bitter who takes all of her blessing for granted.

    * Talk in general bromides, and never back it up with any actions.

    * Hint to your dislike of the country, but get really bitchy if it's brought up.

    * Just generally be a sniveling coward."

    :) :) :)
  6. Yannis


    WSJ: Monsieur Obama's Tax Rates

    July 1, 2008; Page A16

    "And speaking of tax rates (...), celebrity chef Alain Ducasse changed his citizenship this month from high-tax France to no-income-tax Monaco. He says it wasn't a financial decision but an "affair of the heart." Of course. Nonetheless, plenty of other Frenchmen have moved abroad to escape their country's confiscatory taxes.

    Americans should be so lucky: Ours is the only industrialized country that taxes its citizens even if they live overseas. That hasn't been a big problem as long as U.S. tax rates have been relatively low. But with Barack Obama promising to raise rates to French-like levels, this taxman-cometh policy could turn Americans into the world's foremost fiscal prisoners.

    And make no mistake, taxes under a President Obama would be à la française. The top marginal tax rate on income – including federal, state and local income and payroll levies – could reach 60% for many self-employed New Yorkers and Californians. Not even France's taxes are that high now that President Nicolas Sarkozy has capped the total that high-earning Frenchmen like Mr. Ducasse can pay in income, social and wealth taxes at 50% of earnings.

    Mr. Sarkozy set this "fiscal shield" because he knows that tax rates affect behavior. When he visited London this year, he observed that the British capital is now home to so many French bankers and other professionals seeking tax relief that it's the seventh-largest French city. Those expatriates choose not to use their creativity and investment capital to benefit France and its economy.

    Senator Obama's plans to raise income, Social Security and capital-gains taxes amount to a belief that people don't react to punitive tax rates. If so, he needn't worry about people leaving the country and could let them pay taxes in whichever part of the globe they choose to live in. Once Americans are paying French-style tax rates, they ought to have the same freedom to move as Alain Ducasse."