The Homa Files

A few years ago I stumbled on a Dogbert cartoon.  At the time it made me smile. 

Today, the cartoon makes me nervous — very nervous.

Of course, the source of my angst is the Obama tax plan.  But, my specific concerns aren’t the ones that most pundits dwell on.

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Buying Votes

True, Obama did hijack Dogbert’s campaign strategy and plans to raise tax rates on the top 3% of income earners (individuals and  couples earning over $250,000 annually) and to redistribute the “savings” via a new tax credit of $500 per person, or $1,000 per working family.  

Cynics point out that in the good old days, Mayor Daley’s Chicago political machine could deliver a  vote for a the price of a pack of cigarettes.  Apparently the price of a vote has gone up more than the price of gasoline.  At least votes are now  “marked to market”.  The Obama plan clearly sets the price at $500 (cash) per vote, with a perpetuity value of about $10,000 @ 5%.

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Buying Old Folk’s Votes

And, Obama promises zero Federal taxes for seniors over 65 on income up to $50,000 . 

Mark Penn, Hillary Clinton’s former chief strategist says: “The Obama camp hit a bull’s-eye with this proposal, which has little economic justification but is great politics.” http://www.politico.com/news/stories/0708/12117.html

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Upping High Bracket Marginal Rates

In a WSJ op-ed, Stanford economics professor Michael Boskin opines that despite the rhetoric to the contrary,  Obama’s increases don’t just hit “rich” individuals.  They also impact lot of small businesses and two-earner households in high cost-of-living areas.

Specifically, Obama would raise the top marginal rates from 35% to 39.6%,  increase the tax rate on capital gains and dividends, and uncap Social Security taxes (which currently are levied on the first $102,000 of earnings).

When payroll and state income taxes are thrown in, Boskin estimates that the high bracket marginal rate goes to over 60% —  with almost $2 of every $3 earned at the margin, going to the government for services and redistribution.

click to make table bigger

http://online.wsj.com/article/SB121728762442091427.html?mod=opinion_main_commentaries

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Redistributing $131 Billion Annually

An analysis done by the Tax Foundation — a self-proclaimed non-partisan think tank —  indicates that Obama’s plan — as proposed — would redistribute about $131 billion each year.  Taking money from the undeserving rich, and giving it directly to the financially besieged middle (and lower) class). 

“Hard Numbers on Obama’s Tax Redistribution Plan
http://www.taxfoundation.org/publications/show/23319.html

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My POV

1.  On a philosophical level, I agree that the grossly uneven distribution of earning power in the US is a serious problem that needs to be fixed. 

2. But, I don’t think that the problem of income inequality should be fixed via a tax system — which was originally intended to “tax & spend” efficiently on necessary common services — not to “grab and redistribute”.  Direct transfers from one citizen’s pockets to another’s (e.g. refundable tax credits) are certainly the latter.

3. Except for the impact on small businesses, I can’t get too riled over marginal rate increases that start at $350,000; but I do think a “doughnut hole” payroll tax schedule is wacky and I think raising capital gains taxes during an economic slowdown is dangerous.

4 . My real  issue:  The numbers say that in Obama World, a minority of voting age Americans will be paying income taxes.  That scares me. What’s to stop an income tax-free majority from continually voting  to  raise taxes on the tax-paying minority to fund an ever increasing potpourri of benefits or add to the redistribution pot.

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Next Up: The numbers are conclusive … taxpayers will be a minority.

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This entry was posted on July 30, 2008 at 6:45 am and is filed under Government & Politics, Taxes, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.