Obama's ‘tax cuts' too costly
Sen. Barack Obama proposes a welfare plan that will transfer billions of dollars from those who earned it to others who didn’t.
He doesn’t call his plan “welfare” or even “hand-outs,” which would be accurate descriptions. Instead, Obama portrays this massive redistribution of wealth as “tax cuts,” which are more palatable to voters. Who could object to tax cuts?
The presidential aspirant says he will “cut taxes for 95 percent of workers and their families ….” The first of many problems with this claim is that only about 62 percent of U.S. households pay anyincome taxes. How then under Obama’s plan can most of the other 38 percent who already pay no income tax also get a tax cut?
The answer is that their tax liability will be reduced by giving them tax credits. Most people recognize the absurdity of lessening a burden that’s already zero. But it is an election year.
In one sense, 95 percent of American workers and their families will benefit from this scheme with either less money going out or more coming in. But they profit only at a huge cost for the remaining 5 percent, who happen to earn more income than Obama thinks is proper.
That small minority of the populace will be stuck with the bill. Their taxes will increase in order to provide for the cash not collected from or handed out to 95 percent of us. This has a short-sighted appeal for many of the 95 percent.
Except by degree, this also is not new to Washington, where people routinely send their money in order that the government can send it back out again to people who didn’t earn it.
In 1999, about 30 million tax filers had no income tax liability after taking advantage of credits and deduction. The number had mushroomed to 44 million by 2006, according to the nonprofit Tax Foundation.
Obama is proposing to buy the support of a broad swath of voters with the money earned by a narrow band of America’s most wealthy. He assures voters that no family making less than $250,000 a year will see an increase in taxes. Why $250,000? It’s probably as arbitrary a distinction as the rest of the numbers in his tax plan. Why eliminate taxes for seniors making less than $50,000, as he proposes? Why not $30,000 or $75,000? Why provide a 10 percent mortgage interest tax credit instead of 5 or 20 percent? Why reduce taxes by $3,700 on married couples making $75,000 with two children, one in college? Why not $5,000 or $1,000?
We suspect Obama’s metrics have more to do with how many votes he can acquire, rather than how much fairness he can inject into the tax system. And he will acquire those votes by taking then spending other people’s money.
There are other costs. The Heritage Foundation says Obama’s tax proposal would increase the U.S. top marginal income tax rate from 42.7 percent to 56 percent, making it comparable to Sweden’s 56, Germany’s 57 and Belgium’s 60 percent. Part of the price paid in those economies, says the Heritage Foundation, is high unemployment from 7 to 9.8 percent. Moreover, high tax rates also encourage capital and income flight to lower-taxed areas.
But there’s an even more costly price in Obama’s tax proposal. We favor reducing taxes as a matter of fairness. But there is nothing fair about a minority footing the whole bill while large segments of the population pay little taxes, if any, or receive government handouts.
