About Those Tax Plans
by tgirschOctober 15th, 2008
Earlier today, Uncle wrote:
I can’t find where taxes are lower for anyone under Obama’s plan.
If that’s true, then he’s not looking or not paying attention. See the non-partisan Tax Policy Center’s report (PDF) on the two candidates tax plans. In particular, note Figure 1 on page 41 — for the bottom four quintiles, both candidates cut taxes, but the average increase in after-tax income as compared to current law is much larger under Obama’s plan than it is under McCain’s:
(More after the fold)
The top quintile is the only group for which the average after-tax income goes down under Obama, and the detailed numbers (e.g., Table 4, Page 33) show that you’d have to be in the top 1% of taxpayers to see a decrease in after-tax income:
Under the Obama plan, families in the middle quintile would see their taxes go down by an average of $1,035 in 2009 as compared to current law (Table 3, Page 32):
Whereas under McCain’s plan, the average tax savings for that same quintile is only $325 (Table 6, Page 36):
For the middlest of the middle class (for lack of a better description), the average tax savings in 2009 under Obama is more than three times what it would be under McCain. Even for the upper-middle class (the fourth quintile), the increase in after tax income would be half again as large under Obama (+2.4%, Table 4, Page 33) as compared to under McCain (+1.6%, Table 9, Page 39):
Bottom line: If you’re not in the top 10%, your taxes will go down, and if you’re not in the top 1%, your taxes won’t go up. Further, if you’re in the bottom four quintiles, your taxes will be lower under Obama’s plan than they are under currently, and lower than they would be under McCain’s plan.
Now, of course, all of these reports assume that the candidates would actually be able to get their tax plans passed as proposed, and if you believe that of either candidate, I’ve got a bridge in Alaska to sell you, especially in light of the current state of the economy. But the point is that according to their stated plans, taxes would be lower for the overwhelming majority of taxpayers under Obama than they are under current law, and lower than they would be under McCain. You can argue about the fairness or lack thereof — and the fiscal responsibility or lack thereof — of the two plans, but it’s either ignorant or disingenuous to state that “taxes [won't be] lower for anyone under Obama’s plan.”
Crossed at Say Uncle
[UPDATED for clarity]
Comment crossed at sayuncle.
Good post presenting what I’m sure you regard as facts. However…
Nonpartisan my ass! Can you seriously say you looked at http://urban.org/about/index.cfm, or even read the opening of the PDF, and think it’s nonpartisan? It was founded by ‘Great Society’ Lyndon Johnson. That alone makes it less likely to be nonpartisan as an organization to study comparative religion founded by Pat Robertson.
Like Sailorcurt at saysuncle, I noticed the exclusion of Obama’s payroll surtaxes from the presentation of his plans.
Like Chris at saysuncle, I noticed that corporate taxes are excluded from the presentations, which are a huge difference in the plans. Corporate taxes are a tax that CEOs and CFOs decide how to distribute between employees (in pay rates, bonuses, layoffs, etc.), shareholders (dividends), and customers (prices). Most of us are customers and employees, and everyone with a 401K that invests in companies that pay American taxes is a shareholder.
Corporate taxes are a ‘regressive’ impact that in this type of graph would show up mainly on the three lower quintiles. Of course, since the exact numbers are based on individual corporate decisions and indidivial consumer’s buying, it would be impossible to include any firm number for them.
EgregiousCharles:
Good post presenting what I’m sure you regard as facts.
If you see anything that I incorrectly identify as a fact, by all means feel free to point it out.
Nonpartisan my ass!
If you have a source you think is less biased, you’re more than welcome to suggest it.
Like Sailorcurt, I noticed the exclusion of Obama’s payroll surtaxes from the presentation of his plans.
It wouldn’t make much difference to the final result. The surtax in question is a proposed 2% payroll tax for each the employer and employee on any payroll income over $250,000. So if your salary/wages amount to less than $250K, the results are unchanged. But let’s unpack that.
Suppose you have a salary of $300,000 per year. Your salary exceeds the $250,000 mark by $50,000. 2% of $50,000 is $1,000 in additional taxes. Add another $1,000 for the company’s share, and you get a whopping $2,000 in additional taxes on a $300,000 income. Holy Redistribution of Wealth, Batman!
Corporate taxes are a tax that CEOs and CFOs decide how to distribute between employees (in pay rates, bonuses, layoffs, etc.), shareholders (dividends), and customers (prices).
You know, that could just as easily be flipped around. When you cut corporate taxes, the CEOs and CFOs decide how to distribute the tax savings among employees, shareholders, and customers. If you think the bulk of that savings is going to go anywhere other than the shareholders, we can start discussing that Alaskan bridge again.
Corporate taxes are a ‘regressive’ impact that in this type of graph would show up mainly on the three lower quintiles.
That may very well be the most asinine argument I’ve heard in a very long time. How the hell do you figure that works? To buy that, you basically have to think that cutting $1 of Wal-Mart’s taxes would have a greater benefit to Joe Sixpack (the plumber?) than cutting $1 of Joe Sixpack’s taxes would. In either case, you’ve collected $1 less revenue. But to whom does that additional $1 make a bigger difference? Your argument says that the $1 saved by Wal-Mart notices the extra $1 more than Joe Sixpack does. That doesn’t even pass the laugh test. Of course Joe’s going to be more impacted if he gets the tax cut directly, as opposed to indirectly through a corporation with which he may not even do any business…
Finally, all of this is essentially moving the goal posts anyway, because Uncle’s argument that taxes wouldn’t be lower “for anyone” under Obama’s plan has been thoroughly eviscerated.
P.S. What part of the Urban link was supposed to convince me that they’re not nonpartisan? The part where they self-identify as nonpartisan in the very first paragraph?
Comment crossed at Say Uncle.
tgirsch: “If you have a source you think is less biased, you’re more than welcome to suggest it.”
Fair enough. While I am astonished that somebody can poke around that site and still think it’s nonpartisan, I don’t have a nonpartisan source handy.
tgirsch: “What part of the Urban link was supposed to convince me that they’re not nonpartisan? The part where they self-identify as nonpartisan in the very first paragraph?”
Um, OK, they self-identify as nonpartisan. Great. I will now self-identify as nonpartisan, and further, I self-identify as and smarter than them and ALL y’all. Convinced? Didn’t think so.
The most glaring part that is supposed to convince you that they are partisan is the founder. One of the most faithful proponents of social engineering creates a ‘nonpartisan’ society to report on the effectiveness of social engineering. I’m sure you’d see the problem if it were founded by John Birch.
tgirsch: “You know, that could just as easily be flipped around. When you cut corporate taxes, the CEOs and CFOs decide how to distribute the tax savings among employees, shareholders, and customers. If you think the bulk of that savings is going to go anywhere other than the shareholders…”
Also having a low opinion of CEOs and CFOs, actually I think at first much of it will go to the employees; that is, those employees that are CEOs and CFOs and other top-management suits with good hair. Not the best possible outcome. However, some businesses will use it to reduce prices and/or improve staff by improving salaries. If the cut is significant those businesses will have a significant advantage. Not to mention that it will reduce the financial disincentive for companies to operate in the US.
tgirsch: “That may very well be the most asinine argument I’ve heard in a very long time. How the hell do you figure that works? To buy that, you basically have to think that cutting $1 of Wal-Mart’s taxes would have a greater benefit to Joe Sixpack (the plumber?) than cutting $1 of Joe Sixpack’s taxes would.”
Um, no. I’m not sure how you came up with that. I didn’t say that a $1 corporate tax cut is just as good as a $1 income tax cut. I’m saying that the corporate taxes aren’t (and in fairness couldn’t be) included on the graphs; so there is a significant positive tax impact that is ignored in a way that favors Obama.
The payroll surtax is not very significant but is also ignored in favor of Obama.
tgirsch: “Finally, all of this is essentially moving the goal posts anyway, because Uncle’s argument that taxes wouldn’t be lower “for anyone” under Obama’s plan has been thoroughly eviscerated.”
I was taking the post more on it’s own merits than as the reply which it was.