Obama's Big Vote Buy
Why is everybody so determined to give away our money? McCain wants to give it to the bankers, in buying their worthless loans at face value, and Obama wants to give it to a good bit of the population...just because. I'm so charmed.
William McGurn writes on WSJ.com about the Obama "tax cut"; really a tax bribe in which 95 percent of Americans will get a check -- including the estimated 44% of Americans who will owe no federal income taxes under his plan:
In most parts of America, getting money back on taxes you haven't paid sounds a lot like welfare. Ah, say the Obama people, you forget: Even those who pay no income taxes pay payroll taxes for Social Security. Under the Obama plan, they say, these Americans would get an income tax credit up to $500 based on what they are paying into Social Security.Just two little questions: If people are going to get a tax refund based on what they pay into Social Security, then we're not really talking about income tax relief, are we? And if what we're really talking about is payroll tax relief, doesn't that mean billions of dollars in lost revenue for a Social Security trust fund that is already badly underfinanced?
...Now, if you have been following this so far, you have learned that people who pay no income tax will get an income tax refund. You have also learned that this check will represent relief for the payroll taxes these people do pay. And you have been assured that this rebate check won't actually come out of payroll taxes, lest we harm Social Security.
You have to admire the audacity. With one touch of the Obama magic, what otherwise would be described as taking money from Peter to pay Paul is now transformed into Paul's tax relief. Where a tax cut for payroll taxes paid will not in fact come from payroll taxes. And where all these plans come together under the rhetorical umbrella of "Making Work Pay."
He quotes Andrew Biggs:
"It's interesting that Mr. Obama calls his plan 'Making Work Pay,'" says Mr. Biggs, "because the incentives are just the opposite. By expanding benefits for people whose benefits exceed their taxes, you're increasing their disincentive for work. And you're doing the same at the top of the income scale, where you are raising their taxes so you can distribute the revenue to others."And that leads us to the heart of this problem. If the government is going to give tax cuts to 44% of American based on their Social Security taxes -- without actually refunding to them the money they are paying into Social Security -- Mr. Obama will have to get the funds elsewhere. And this is where "general revenues" turns out to be a more agreeable way of saying "Other People's Money."
Well, isn't that nifty!
Just do away with Social Security, and spare us the propaganda that it's to give us income in our declining years (which we are not guaranteed to even reach). It's to track our earnings and leech them from us, no other reason.
Patrick at October 21, 2008 5:08 AM
But isn't McCain going to do the opposite... tax me on my health benefits so he can give more tax cuts to a bunch of rich people?
NicoleK at October 21, 2008 5:37 AM
That's what Obama wants you to believe, so you'll support his nationalization of the health-care industry.
But why shouldn't you pay taxes on your health benefits? We're talking a major portion of your income that's not subject to tax, whereas the self-employed pay taxes on such things.
McCain actually wants to make it a personal deduction. This is his way of implementing the one true reform of the system - take the employer out of the loop entirely.
Maybe if you knew what medical care REALLY cost you'd use less of it for trivial things.
brian at October 21, 2008 6:01 AM
Amy Alkon
http://www.advicegoddess.com/archives/2008/10/21/obamas_big_vote.html#comment-1599048">comment from NicoleKI've been taxed on my health benefits (meaning, I pay for them with after-tax dollars) for most of my working life because I'm self-employed. What McCain is going to do is end the financial discrimination here. Why would that be a bad idea? Why should I get bent over just because I don't work for a company? I still work -- and employ a couple of people part-time.
Amy Alkon at October 21, 2008 6:33 AM
NicoleK,
"... so he can give more tax cuts to a bunch of rich people?" It is a fallacy to assume that tax cuts to the rich is a bad thing. What creates employment and wealth? Well that would mostly be entrepreneurship and investments. We need to encourage rich people to invest in order to create employment. Just as important, we need to encourage would-be entrepreneurs to persue their dreams. Would you risk most (or most likely all) of your capital, work insane hours, pretty much give up your social life, to start a business (with a minute chance of success) just to have the government take most of it away later on? We need to encourage the types of people that will create the next Microsoft. It is hard to encourage people when you take away their hard earned money ...
Charles at October 21, 2008 6:37 AM
NicoleK, it's been said before but bears repeating: Corporations Do Not Pay Taxes. They just pass them right along to you in the form of higher prices, fewer employees, and lower wages. Fair or not, that's what happens. If you take away their taxes they can lower prices on consumer goods, employ more people (spreading that paycheck wealth around) and pay better wages. That benefits everyone, except the people-more and more every day-who don't feel they should have to work to get money.
Treating the portion of your healthcare cost that your employer pays as income, and taxing you on it, is much more fair than taxing OTHER people to pay for it, which is what Obama wants to do. I don't like it, since GE pays out the nose for our healthcare personally, but at least it's fair.
If you punish drive and success, and reward laziness, you end up with a nation full of mediocrity at best. People with real drive will just head across the border.
Did anyone see Joe the Plumber on Hannity last night? The man makes more sense and talks better than any candidate. Maybe you people looking for a write-in should vote for him.
momof3 at October 21, 2008 6:54 AM
I would also add that high taxes discourages firms from actually locating and/or expanding in your jurisdicition ... but great point momof3 ...
Charles at October 21, 2008 7:31 AM
There doesn't seem to be too much difference between the Obama Tax Cut/Credit and Milton Friedman's Earned Income Tax Credit.
At a time of a falling economy, it seems like a good idea and part of a safety net to help ensure that everyone has a little bit of spending money.
I guarantee you that unlike the tax cuts for the rich, tax credits for the poor won't be saved in a bank, won't be used to buy hedge fund stocks, but will be used to buy groceries, pay rent, visit a doctor, buy school clothes and books, and will soon be back in the economy.
jerry at October 21, 2008 8:03 AM
Jerry -
Wrong.
Estimates are that 50% of the last "stimulus" gag went straight to either debt reduction or savings.
In other words, they didn't stimulate a damned thing.
Americans as a whole are over-leveraged, and they need to start making payments.
brian at October 21, 2008 8:37 AM
Brian, your statements seem at odd with each other.
You seem upset that the last stimulus when to debt reduction, and then you say Americans need to start making payments.
So I am not sure what you are saying.
jerry at October 21, 2008 8:43 AM
I guarantee you that unlike the tax cuts for the rich, tax credits for the poor won't be saved in a bank, won't be used to buy hedge fund stocks, but will be used to buy groceries, pay rent, visit a doctor, buy school clothes and books, and will soon be back in the economy.
Jerry, please take an economics class not taught by a socialist.
That hedge fund stock or savings account is "in the economy." Economics is not just about supply and demand for the local grocery store.
Stock prices determine credit worthiness and affect spending decisions by corporate America (whether to spend money to upgrade machinery, expand operations, develop new products etc.).
The money spent on these operations does far more to stimulate the economy in the long run than a few million people buying extra groceries for a week or two.
Savings accounts and investment funds give banks and investment companies liquidity (i.e., cash available to lend or invest). This movement of money further stimulates the economy. That's part of the problem now; companies have little to no liquidity (that's what "credit crunch" means).
While buying groceries, books, clothing, etc. does have an immediate beneficial effect on the economy; buying stocks, bonds, etc. has a long-term beneficial effect.
Tax credits are like taking aspirin for a back problem, the pain will go away - for a little while. Tax rate reductions are like having back surgery, much more likely to reduce the pain or make it go away for a long time.
That's not to say the aspirin's not a good thing. It is. Or that the pain won't recur from time to time even with surgery. But the aspirin only treats a symptom and is not a solution to the problem.
Short-term giveaways weren't a solution when Bush gave away a "stimulus" and they won't be when Obama gives the middle class's money to the poor on April 16th in the form of a "tax credit."
The solution to our current predicament is to put the money into the economy at large and not in the government's vote-buying giveway programs (even if the giveaway is hidden behind a GSE like Fannie Mae).
PS - McCain's plan is only marginally better in some ways and worse in others.
Conan the Grammarian at October 21, 2008 9:18 AM
So what will be left to wage the wars in Iraq, Afghanistan, the bailouts for big oil and big car?
Tha Mad Hungarian at October 21, 2008 9:18 AM
Jerry,
Employment is basically the key to economic health. Having a bit of spending money (from a one-time handout) does not create employment. Investment and entrepreneurship creates jobs not government handouts.
Tax cuts should be for everyone including the rich. If an entrepreneur or corporation needs money in order to introduce and new product or expand in a different geographic area (which would create jobs!!!), do you not think that it would be a good idea to encourage rich people to finance them? Btw, what do you think hedge funds do exactly? They help finance real companies so they can grow, make investments, and hire more people! Good grief ... this isn't rocket science ...
Charles at October 21, 2008 9:20 AM
It isn't common knowledge just how much wealthy people already pay, and how much tax is wasted by increasing spending on everything. Ironically, raising taxes on anyone will lower the production of the US, and so will lower the number of jobs.
There are two myths that make people eager to raise taxes, if it doesn't affect them personally.
(1) Taxes are a nice transfer. $1 from him means $1 for me or my friends.
(2) Government spending stimulates jobs. Good for the economy.
See: ideas.repec.org/a/tpr/restat/v81y1999i4p674-680.html (Paste into browser)
I will restate this. Government activities and transfer payments had better be useful to the society, because economic output has already been lowered by 30% of the taxes currently collected. Output will be further lowered by $2 for each $1 of any additional taxes collected. This means that $2 worth of production (jobs) will be destroyed for every additional $1 collected through increased taxes.Tax Avoidance And The Deadweight Loss Of The Income Tax
2000 by Martin S. Feldstein, the George F. Baker Professor of Economics at Harvard University and former President of the US National Bureau of Economic Research.
This is a severe loss, because there is no "stimulus" that goes beyond that "extra" $1 in government spending, which would have been invested or spent anyway. There is only moving goods around from some people to other people, at great expense. To transfer $1 to a needy voter, the government will take $1 from a rich person AND eliminate $2 in production of goods and services, also called jobs.
I argue at "The Myth of the Economic Multiplier", why the common belief in an economic stimulus from spending feels right, but is wrong anyway.
Government spending is a banquet, not a stimulus.
(Paste into browser)
easyopinions.blogspot.com/2008/08/econ-201-myth-of-economic-multiplier.html
For fun (I hope) see my parable "Public Tax Meeting"
(Paste into browser)
easyopinions.blogspot.com/2008/09/public-tax-meeting.html
Andrew Garland at October 21, 2008 9:28 AM
The stimulus package was sold to the American people on the basis of, y'know, stimulating the economy.
Paying down the visa bill doesn't stimulate dick. Unless, of course, the person making the payment immediately runs out and goes further into debt.
I'm not upset at how the money was used (that's what I did with it), I'm upset that it went out at all. I'm not going to send it back, but I don't think the government ought to have taken it in the first place, and for every dollar I got, someone who never paid a dime in taxes got one too.
brian at October 21, 2008 10:54 AM
Quite frankly we need a new tax plan.
5% on all proprty worth more than $5,000 paid to the county you live in
10% of all earnings from wages, annuites, stocks etc - but not home sales
2% to your city
3% to the county
3% to the state &
2% to the feds
no sales tax
no corperate tax &
no government subsidies - EVER
lujlp at October 21, 2008 11:33 AM
Much like a parent doesn't want their child to learn about touching a stove by actually getting burned, those of us outside the U.S. who have not had our minds numbed by the Socialist Kool-Aid, are hoping against hope that Americans don't embark on Obama's Great Socialist Experiment. But this suggests that you are.
And Michael Medved has a detailed article on why the changes made in an Obamanation will be permanent and devastating.
I have never felt that McCain is the optimal choice but it truly is shocking to me how so many Americans have been brain washed by the socialist rhetoric espoused by Obama and his many protective pals in the MSM.
Let's talk 2 years from now and see if many still feel Obama is the transformative Messiah figure that so many currently espouse him to be.
Robert W. at October 21, 2008 12:36 PM
Well, given that anyone who doesn't respond properly will either be investigated within an inch of their life or sent off to re-education, the only answer you'll get is "Comrade Obama is the best leader America ever had".
brian at October 21, 2008 1:40 PM
Let's talk 2 years from now and see if many still feel Obama is the transformative Messiah figure that so many currently espouse him to be.
I think it's a given that one of the "reforms" the Democrat-controlled 111th Congress will pass (and Obama will sign) will make it even easier for the incumbents to win reelection, thus insuring a Democrat-controlled Congress for the entire 4 years of Obama's [first?] term.
Conan the Grammarian at October 21, 2008 1:56 PM
I guess Jerry and the Mad Hungarian were just passing by ;) Does anyone understand the Hungarian's nonesense about bailouts for big oil and big car?
Charles at October 21, 2008 2:50 PM
Perhaps because we have jobs and lives, we can't huddle around the computer in mommy's basement all day, ready to answer the next insult from Charles, et. al.
Take an econ class from a non-socialist. That's funny, since what I said was that the Obama tax credit looks an awful lot like Milton Friedman's EITC.
Uncle Milty: socialist.
Who knew?
jerry at October 21, 2008 5:19 PM
Uncle Milty: socialist. ... Who knew?
Acutally, yes.
Uncle Miltie started out as a Keynesian and strong supporter of FDR's New Deal and other government economic stimulus programs.
As he grew older and more experienced (and wiser), he reversed his views - to the point that he rejected government interference in markets and the economy.
Conan the Grammarian at October 21, 2008 5:39 PM
I'll say it again (unfortunately probably not for the last time since people don't get that you can't pay tax on money you don't get) you can tax my health benefits when I get cash for them instead that I can take to the provider of my choice.
And, Amy, love ya but got to tell you this particular song's getting real old. You are not taxed on things I am like costs incurred just by working. You get to take credits against your home business. I don't get to deduct things like my transportation costs. (Not that that's much since I take the bus.) You get to deduct part of your rent for running your business from your home.
I'm no CPA and my taxes are uncomplicated but don't you also get to take deductions for expenses such as those employees of yours and equipment such as the computer and internet? I could be way off-base but the self-employed are able to itemize and claim shit that I don't have so I fail to see why they should resent that I don't have to pay taxes on income that I don't get. I don't resent that you get those deductions. I think it's great that you do because it takes balls to go it alone without a safety net. So why the hell should you resent that I don't get tax on my employer's share of my health insurance?
I think you must just be fixating on one thing and not looking at the whole picture but it's kind of hard to comprehend coming from you. Has it been that long since your days sleeping on a sleeping bag?
I've got to side with Nicole and Jerry here. I don't think those who have have one clue what it's like to have not. Maybe that's Obama's appeal. He gets the struggle. I think he's taking the wrong approach but at least he gets the struggle. McCain and Palin definitely do not.
I think it's time to look at things like raising the minimum wage and cracking down on both illegal aliens and making shipping jobs overseas so encumbersome as to not be desirable. That would serve both the rich and the poor more long run and definitely benefit everyone in this country by making it simply more prosperous.
Tax credits aren't the best solution but when someone who was unfortunately born into poverty and didn't have opportunities was screwed because you can't get a working wage for an honest day's unskilled labor anymore, you'd damned well better compensate somehow to keep the masses contented -- the masses rich entreprenaurs need by the way since without labor producing their product they're fucking screwed too.
Oh, and another thing that no one's looking at is computer takeover. When I started out in the secretarial field in 1976 (not counting my high school job), it was a good living. Now, not so much. I'm doing pretty good but because I have a government job and decades of experience. But 30 years working this I have watched computer takeover to the point where there's one secretary where there used to be five. And that's just my field.
Let's address the real issues affecting all of us: lower, upper and middle class.
Sadly, of course, our politicians aren't. That's true of both Obama and McCain. But I've gotta tell you I'm back to hoping Obama wins because I personally will be less screwed by his winning than Obama. Moneywise, not so sure about my daughter and my grandson but socially they too will be less screwed by Obama.
And, yes, I know I'll take heat for that. Go ahead. Pile it on. You're getting as funny in your defense of McCain as the Obama's-the-Messiah nutters.
T's Grammy at October 22, 2008 11:41 AM
T, what none of you up-the-min-wage-people get, is that if you up the min wage, every price jumps up automatically, and the new min wage is the equivalent of the old one. People earning it will not have more buying power. Or a better standard of living. There will always be have-nots. There's no possible way to not have them, in a society. Unskilled workers will never earn what others earn. Nor should they expect to. It's called unskilled for a reason.
momof3 at October 22, 2008 7:12 PM
God, Mof3, you are so ignorant and I do wish you'd read the whole thing, not half.
No one even implied that they should make as much as skilled. Just that they should be able to get a decent working wage. Competion is the check and balance to that and before there was a minimum wage at all in this country what was life like for the working stiff?
Um, yeah, I do indeed think the minimum wage has worked to improve the standard of living for everyone across the board. The current problem -- the things I mentioned since you seemed to have blinked and missed them like illegal immigration and farming jobs out to foreign countries that don't have a minimum wage -- is that the minimum wage is being undermined and also that it hasn't been brought up to a reasonable standard of survival.
T's Grammy at October 23, 2008 9:58 AM
T, see my comment on the more recent Obama-tax thread, I don't have time to retype it.
No one's going to pay a person decently to pick food, because no one wants to pay that for their food. Ditto every other unskilled job. Outsourcing jobs is not going to stop. Why should a company have to pay an american $10 an hour to do something when a poor Indian will be happy to do it for $3? I don't want to pay 3X more for the things I buy, and neither do you.
I hate unions. They got us 8 hour days and safety, and now they need to leave.
I'm not ignorant. I'm unsympathetic. I just don't care that people who don't bother to learn a skill can't buy a new car.
momof3 at October 23, 2008 5:59 PM
Leave a comment