How the Future U.S. President Wants to Tax You
There’s no need for me to explain in detail the favored tax policy by each of the four leading candidates for the President of the United States for two reasons. First, Jeanne Sahadi wrote an excellent tax policy summary for Hillary Clinton, Barack Obama, John McCain and Mitt Romney. Secondly, the candidates’ stances now may be indicative of what will happen once they are sworn into office, but there are hurdles built into the system. Additionally, candidates’ positions can change between now and 2009
Here are some things to take away from what they candidates say they want.
* They all want to preserve recent tax cuts for low- to middle-income earners.
* The two Republicans want to preserve recent tax cuts for households earning over $250,000 while the Democrats want to repeal these cuts.
* Romney wants to lower the rate on the lowest tax bracket to 7.5% from 10% and exempt workers over 65 from having to pay Social Security tax.
* Obama wants to eliminate income tax for seniors earning less than $50,000 and add a $500 to $1,000 credit to all households with working family members (phased out for households with income between $150,000 and $200,000).
* The two Democrats want to expand the earned income tax credit and the saver’s credit.
There are more differences in the article.
The big questions are whether these positions will change as campaigns get tighter and we approach the general election, whether opinions will change once the new President is sworn in, and whether they can get the changes pushed through Congress.
According to the polls, the economy seems to be a hot issue among primary voters, and the candidates’ positions on income tax are related to this priority. Will the economy still be in the front of voters’ minds when the general election rolls around?
Article comments
What the President wants and what they get are two different things. The Senate has the biggest hand in dealing with government changes.
LIama Money:
The best way to explain it is to look at history and you will see it’s been PROVEN to work.
Here though, is an EXCELLENT presentation on how it works:
http://www.youtube.com/watch?v=fIqyCpCPrvU
DF:
I’m no economic genius or analyst, or anything of the sort. As a regular guy, I have trouble following your logic. Perhaps there’s a big portion I’m missing ( probably ) but here’s how I look at it. Say the new president cuts taxes, and Joe Consumer pays $1,000 less in taxes for the year. He takes said $1,000 and buys himself a new computer at Best Buy – he deserves it after all. Profit margins being slim on computers, let’s say BB’s profit is just $200 on that computer. Since a business pays taxes on profit rather than gross revenue, they only pay taxes on that $200.
Even if their tax rate is 50% ( impossible? I don’t know. Sounds high ), they would pay $100 in taxes. So how does the government make that balance? They forgo $1,000 in tax revenue to receive $100 in tax revenue. That’s a $900 net loss.
I understand that tax cuts can help the economy, but I don’t understand how they can actually increase tax revenue. Please help me shed some light on this.
For all of you above that profess amazement that we’d consider cutting taxes at a time when the government is running a deficit; repeat after me:”Cutting taxes does not equate to cutting revenue” Have you got that? You can say it again if you’re having a bit of trouble with this concept. That’s the same attitude exhibited by the politicians and commentators who talk about how much tax cuts would cost. It all depends upon your point of view, now doesn’t it. Many of us would argue (and I am) that tax cuts actually save, because we’re looking at it from the perspective of our finances, not the federal budget.
Back to the subject of tax cuts costing revenue. That completely ignores the effect of the additional money in the hands of the private sector and its effect on the economy. If that money that is not spent on taxes sufficiently stimulates the economy and the GDP grows, total tax revenue can actually increase, even though the tax rate actually declines. This has been observed on many occasions. If you feel that higher taxes contribute to greater economic prosperity, you must feel that the government is more efficient at allocating resources and creating wealth than the private sector. LOL!!
I’m not so sure “cutting” is going to work for now, but we definitely do tons of dumb things with taxes. For instance, I’d support making inflation-indexed cap gains and dividends taxable at income-tax rates, but abolishing corporate taxes. (This would put 90% of lobbyists out of business.) Also, I think all payroll taxes should be clearly visible to employees, since they’re part of the employee’s compensation package.
And ag subsidies and pork need to be terminated with extreme prejudice.
As for entitlements, that’s a discussion we’ll have to have shortly. It won’t be pretty, since SS and Medicare cuts are definitely going to happen, and old folks (and especially their lobbies like AARP) won’t like it…
Adfecto: I was referring to the $30 billion portion of the defense budget that is reserved for congressional “pet projects” (pork) which have absolutely no relevance to defending this country from 21st century threats. $30 billion could do a lot of good elsewhere — it could even do a lot of good if directed to the troops overseas, who according to news reports from some time ago, have supply quality and quantity problems. I agree that the ARPAnet was one of these extra pet projects but many of the current ones are too obviously not the “next Internet.”
Even so, many military projects funded are “archaic” and designed to benefit a country that is in a “cold war” situation… and they continue to exist because companies lobby for their funding rather than using their resources to innovate with modern threats in mind. Some do, some don’t, but there are certainly “archaic” programs — not technologically antiquated, quite modern when it comes to the technology — but pointless.
I get frustrated with those who have knee-jerk reactions, as well.
Adfecto:
Excellent post. I think the problem with our country, and it’s leaders, is that common sense isn’t all that common.
I believe in very minimal government, low taxes (around 28% or less total), and in our free market economy.
There are SOOOO many people out here in the real world that are MUCH smarter then any career politician on how to use our own money.
Defense is the primary function of our government. If we do not have security we can not have a healthy economy. We would not be free to pursue democracy and capitalism if we did not feel secure enough to invest. If we do not have a military that would win any and all wars in which we may become entangled then the primary function of our government has not been met.
The total DoD budget for FY 2009 will be 713.4 billion (including the supplementals for war in Iraq/Afghanistan, nuclear weapsons from the Dept of Energy, and all other defense associated costs). That is a tad less than 5% of the projected 2009 GDP. I think 5% is a perfectly reasonable amount to spend in this critical function.
You must also remember that this 5% is spent to employ thousands of military men and women and civilian scientists, engineers, and researchers. The companies like Boeing, Lockheed Martin, and McDonald Douglass also employ thousands and create wealth for their shareholders. The jobs created also can never be shipped over seas or outsourced because of citizenship requirements and security concerns. All of this money filters back into the economy and is subject to taxes!
I would also argue with your characterization of the weapons systems being developed or purchased as “archaic.” These systems are far from it. Do a little research into the technology of the F-22, F-35, and DDG-1000 destroyer. These are the most expensive line items in the budget and FAR from antiquated. They are even accused of being too technologically advanced (thus risky).
It is also important to note that a great deal of technology is spun off of military programs that benefits everyone. DARPA funded the original research which led to the internet! That is one example of hundreds, even thousands, of products which are created from “military” spending. Even the projects which “fail” and do not result in a delivered product because of technological risk fuel innovation for future projects.
I’ll get off my soap box, but I get really frustrated with people who look at 713 billion and have a knee jerk reaction that it MUST be too much. If you put everything into context we get a pretty good deal for the defense dollars we spend and 5% is not too much to ask.
What I’d like to see is some independent audits to see where our money is going and how they are spent.
There is a huge waste. Every now and then you here how a huge chunk of money just “disappeared” (where is this billion dollars, I might’ve misplaced it…oh it disappeared into thin air), or how there was no competitive biddings for contracts or some substandard products delivered on these contracts. I’d bet with some competent people managing these money and independent audits, a lot of money could be saved.
I think it’s fairly way off base to call anyone involved in government today as intelligent as some of the Founders. Smart people do not become politicians, and the Founders, at least what we know of them from their writings, were not like the politicians of today. Reagan was an actor… he surrounded himself with people smart in the way of politics, but he doesn’t fit in with the Founders, either.
Rory: Cutting government is a “Conservative” stance and there are no “Conservatives” among the top two Democrats and the top two Republicans.
The tax cuts and other governmental programs could easily be funded by slashing the percentage of the defense budget that goes toward archaic programs that have no relevance in the 21st century, but that won’t happen.
why doesn’t ANY of the candidates talk about CUTTING government?
that’s the issue
What about Huckabee? He’s giving Romney a hard fight for second place…If the press didn’t focus so much on Romney to the exclusion of Huckabee, I think Huckabee would be even strong. Anyway, Huckabee supports the FairTax, which would eliminate almost all federal taxes and replace them with a significantly higher, but single, sales tax.
Guys,
You cannot compare the national debt with your own personal finances. While it’s extremely benficial for us to eliminate debt and build-up savings in our finances, the rules are completely different for the government.
When the tax rate is cut, tax revenue goes up.
When the government goes into debt, the economy generally grows.
When it has a surplus, the economy generally slows down.
As long as other nations accept our fiat currency instead of one tied to the gold standard, our debt is meaningless because the government can print a theorectically unlimited amount of money.
Here’s the real key to why debt is bad for us but not for the government: We have to pay taxes with dollars while it does not.
I love Ron Paul! If there ever was somone (other then Ronald Reagan) who was as smart as our country’s founders it’s Ron Paul.
There is WAY too much spending (not counting the military) in EVERY field the government supports.
I really wish we could cut EVERY program one by one and start them from scratch.
Why not have every program available to the public so we can see exactly where our money is going and then decide on what to do with it. Really, the national debt is shocking.. but how truely shocked would we be if we saw the numbers for every program.. I would guess the heart attack rate would severly rise the same day!
Tax cuts are a ridiculous conversation to be having right now – we cannot fund anything that needs funding, and yet they want to cut taxes? I don’t like paying more than my fair share, but this “cutting taxes” discussion has to be put on the back-burner for now.
Unfortunately for Ron Paul supporters, his fervent online fanbase didn’t translate into success in the primaries. Unless he mounts the first successful third-party candidacy we must consider him out of the race.
I agree that suggesting tax cuts without revealing what programs would lose funding is lazy at best and deceptive at worst.
Yup, I’d much rather hear about candidates plans to cut the fat from the budget. Naturally folks like us don’t really see what gets spent on what, but I’m sure they’re PLENTY of fat to be cut. Let’s start there, and then we’ll see about more tax cuts.
All the talk of tax cuts has me scratching my head too. The U.S. deficit is huge. If there is a tax cut it seems like the end result will be a weaker dollar and more inflation, where is the money going to come from. I would only support a candidate who said they were going to cut program X Y and Z which may result in lower taxes (cough, Ron Paul, cough).
All this talk about tax cuts, and no talk about how in the world we would pay for it. The federal government runs a deficit every year, and the total nation debt is incomprehensible by regular folks like you and I.
I like paying less taxes as much as the next guy, but let’s get real – we’re going to have to pay for it one day, one way or another.
wow, a whole bunch of wasteful bad ideas.
how about Ron Paul’s ideas getting some airtime? Less taxes, better security, less wasteful spending, the dollar being worth something, the economy figures being relevant?