Barack Obama’s Tax Plan
How Will The Barack Obama Tax Plan Affect You?
If Barack Obama becomes President of the United States, how will his proposed tax plan effect that economy and the average taxpayer?
This website is meant to give the average voter a way to understand what Barack Obama’s tax plan is, how it will impact their lives, how it fits into the context of history, and what his economic policies will do to the United States should they be implemented.
Many people believe that Barack Obama has an advantage when it comes to the United States economy, but when you analyze his policies through the lens of economics and history, you will see that many of his economic ideas have proven not to work, but also make things worse in times of economic difficulty.
This site is meant to be non-partisan in nature, which means the contributors to this site strive to be neutral and objective when looking at Barack Obama’s economic polices. Our intention is to educate, not influence. This site’s contributors are neither Democrats, nor Republicans. They are instead independent contributors who have a passion for studying economics.
If your number one concern is the economy of the United States and how you can become financially successful in the future, then this could be the most important website you ever read.
So what does the Obama Tax Plan mean for you?
Despite What He Says, ALL Americans Will See Their Taxes Increased Under President Barack Obama.
Before we get into the specifics of the Barack Obama Tax Plan, we want to point out that all Americans can, and will, see an increase in the amount of taxes they have to pay to the government should Barack Obama become President.
The reason for this is something Barack Obama does not discuss - either in his speeches or his debate appearances. And that is the Bush Tax Cuts.
In May of 2003, President George W. Bush signed into law the Jobs and Growth Tax Relief Reconciliation Act of 2003. More popularly known as the “Bush Tax Cuts,” this bill reduced the minimum tax rate, as well as taxes on investment income, such as dividends and capital gains. It also accelerated tax relief by increasing child tax credits and decreasing the “marriage penalty” tax. It also raised the threshold on the Alternative Minimum Tax, to ensure that middle class families were not taxed unfairly.
Because of this, Americans are now paying less taxes than they were under President Bill Clinton. Many Democrats have come out against the Bush Tax Cuts, and under President Barack Obama, the Bush Tax Cuts will not be made permanent, and we can expect the taxes to increase back to Clinton-era levels.
This is, in fact, a “hidden tax increase” that Barack Obama does not talk about when discussing his tax plan, and it will affect all tax paying Americans, not just the top 5%.
Under Obama, The Rich Will Not Pay More Taxes
Barack Obama says that under his tax plan, only the wealthiest Americans will pay more taxes. He is even quick to point out that he is friends with one of the wealthiest men in America, Warren Buffet, and that Warren Buffet has said himself that he could stand to pay more taxes.
That’s easy for Warren Buffet to say. He is worth $65 billion dollars. When you have that much money, you don’t miss much of it when it goes to the government. However, the large margin of “wealthy Americans” fall into the category of entrepreneurs and investors who are typically worth $3 million or more.
These rich people do not tend to pay more taxes - not because of any kind of exemption, but because they are smarter with managing their money. The rich are rich for a reason, and that is because they not only understand how to hold onto their money, but also how to make their money work for them. Not only that, they can afford accountants and lawyers to help them protect their money.
Because of this, many of the wealthiest Americans can legally claim an annual taxable income of around $30,000. This means that they fall in the 25% tax bracket, not the 33%-39% bracket like they are supposed to under an Obama tax structure.
How does this happen? If you’d like to find out more, read our article on How The Rich Hide Their Wealth.
Suffice it to say, under the Obama Tax Plan, the true tax burden will fall on the shoulders of the upper tier of the middle class, those who earn between $140,000 and $350,000 per year.
It Is Impossible For 95% Of Americans To Get A Tax Break
Barack Obama claims that under his tax plan, 95% of working Americans will receive a tax break. However, this is impossible.
The fact is that America has become divided between a growing class of people who pay no income taxes and a shrinking class of people who bear the lion’s share of the burden (i.e. the middle class).
The Bush Tax Cuts were not only for the rich, they actually reduced the burden of low and middle income Americans. But the percentage of people who have zero tax liability and pay no taxes continues to grow.
In 2004, the percentage of tax filers who owed zero taxes grew to 32.4%. On average over the past five decades, about 22% of Americans have not had to pay any taxes at all.
As this number continues to grow (as it looks like it will), the tax burden will only grow bigger on those who do pay taxes - no matter what income bracket you are in.
Keep in mind, the people who don’t pay taxes are not unemployed. Rather, they are working Americans who can eliminate their tax liability by taking advantage of tax credits and deductions in the tax code. This means that a married couple with three children, earning $40,000 a year can make enough deductions so that they owe $0.00 in taxes - and still receive a tax rebate from the government.
People who make less than $30,000 make up the bulk of the non-tax paying filers. But 96% of the non-tax payers are also made up of those who make less than $40,000, and in some cases make more than $75,000 per year (though these tend to be business owners who erase their tax liabilities based on business losses).
For more information on Americans outside the tax system, check out this article.
If this trend continues, those that do pay taxes - the middle class in particular - will be forced to shoulder more and more of the tax burden.
Barack Obama Will Give Your Money To People Who Don’t Pay Taxes
Many of the people who are able to claim a zero tax liability are also able to claim tax rebates based on tax credits awarded by the government.
This means that it is possible for people who pay nothing to the government in taxes will receive money in the form of a refundable tax credit.
So a family of 5 who make $40,000 (that’s adjusted gross income after deductions) who file a zero liability tax return where they owe no money to the government will receive a refundable tax credit of $1,495.
This means that the U.S. Government will cut checks to these zero liability tax filers which equate to approximately 33% of working Americans - essentially the “lower class” Americans which are made up of mostly low-income, young, female-headed households, part-time workers, and beneficiaries of the $1,000 per-child tax credit or the Earned Income Credit.
Where does the money for these refundable tax credits come from? The people who actually pay taxes, of course. This means that the people who do pay taxes are actually giving their money directly to those who don’t pay taxes.
Therefore, the increase in taxes - particularly for wealthy and rich Americans - is less about paying for defense, infrastructure, and social programs, and instead becomes a means for redistributing wealth, which is one of the reasons Barack Obama has been criticized for being a Socialist.
Under Barack Obama’s Tax Plan, You Might Lose Your Job
Barack Obama likes to point out that he wants “greedy corporations” to pay more money in taxes. However, under the law, there is no difference between greedy corporations and regular corporations. After all, all corporations could be considered “greedy” since the purpose of a business is to make as much money as possible.
This means that all businesses filed as S-corps or C-corps will see a raise in taxes. Everyone from the monolithic oil companies to the mom-and-pop grocery store down the street will see taxes on their revenues go up.
Barack Obama tries to defend this decision to raise corporate taxes by saying that small businesses who make less than $250,000 per year will be unaffected. He even claims that the “vast majority” of small businesses make less than $250,000.
This is not true. And if it was true, he fails to neglect the fact that businesses that make less than $250,000 do not create jobs, which is necessary to simulate economic growth.
The U.S. Government Printing Office defines a small business based on gross receipts or number of employees. These can range anywhere from companies that make less than $33,000,000 in gross receipts to companies that employ fewer than 1,000 people. These definitions differ based on the industry the business operates in.
Because of this, it is safe to assume that small businesses able to employ anywhere between 500 and 1,000 employees will, in fact, be directly affected by Barack Obama’s tax increase on corporations.
This will lead to many small businesses having to either reduce the number of employees they retain, or freeze all hiring in an effort to keep profits from shrinking.
You Will Pay More For Goods And Services Under Obama’s Tax Plan
In addition to this, businesses will try and offset the extra taxes imposed on them by raising prices for their goods and services, effectively passing the added cost for the higher taxes onto the customer.
This means that the real burden of increased corporate taxes will be placed on the consumer - particularly the middle class.
For instance, a Convenience Store chain which earns $27,000,000 per year (still considered a small business by the government) will see its taxes go up under Barack Obama. In order to maintain profitability, they will seek to offset the new taxes by marking up the prices of goods sold at the store - soda pop, candy bars, chips, coffee, etc.
This means that the consumer is effectively paying for the increase in corporate taxes. Short of a price freeze on all goods and services enforced by the government, this will be unavoidable.
You Will Be Punished For Making Money By Taking Risks Under Obama’s Tax Plan
Barack Obama has said he wants to raise the capital gains tax to 20%. In television interviews, he has even discussed going as high as 28% on capital gains.
Why is this important? Because Capital Gains Taxes are basically taxes on money you make from selling a non-inventory based asset for an increased price.
A non-inventory asset are things like stocks, bonds, precious metals, and property.
This means if you sold some stock you owned for $100 per share, you would pay a capital gains tax of $28 per share, if the capital gains tax was 28%.
If you bought your house for $30,000, and you sold it for $100,000 - with a capital gains tax of 28%, you’d have to pay the government $28,000 of that $100,000 you sold it for - almost as much as you originally paid for it! (And that doesn’t include realtor fees, the cost of moving, paying off your mortgage, or even the income you can claim after pocketing what’s left over!)
Essentially, a capital gains tax is a punishment on success. If you take a chance on investing in some stock that triples in value, you will have to pay a large chunk of your profit for having that risk pay off.
If you work to improve a piece of property, such as a car or real estate, you will be punished by the government for making a profit on it.
Because of this, a high capital gains tax not only deters investment, it actually hurts the economy and business. After all, why invest in America when you can make more money investing in a country like China where capital gains are taxed at a flat rate of 10%?
Under Barack Obama, a 28% capital gains tax is a very real possibility.
Barack Obama Will Decrease The Value Of Your Money And Increase Inflation
Probably the biggest threat the Obama Tax plan creates is that there is no limit or decrease in spending being proposed by Barack Obama.
In order to afford many of the social programs Barack Obama proposes, there will be only two ways the government will be able to pay for those programs:
1. Increase taxes
2. Print more money
We’ve already seen how Obama plans to tax the American citizen and businesses, but taxes will only bring in so much money. To make up the difference between what taxes are brought in and what programs like government sponsored health care will cost, the government will be forced to print more money to cover it.
The more money that’s created, the less the dollar is worth. This means that the price of goods and services will have to rise in order to keep the value the same.
So while you may make only a set salary, your money will buy less because prices will be forced to go up due to inflation.
With increased inflation, that means that the value of your assets decreases. Your retirement savings is devalued. Your house is devalued. Your debt burden is increased. Etc.
This is not only a danger of a Barack Obama presidency - we have yet to see a Congress that practices spending discipline, and inflation is actually on the rise as we speak. Many people believe that under President Bill Clinton, we saw an economy that recovered from excess spending, but this is not true. Click Here to see the real story behind the Clinton Balanced Budget.
What The Economy Needs
In order to save our economy and ensure a prosperous America, we must have a government which lowers taxes, encourages growth, and reduces spending.
So far, the only candidate who has spoken out on the most important subject - spending limits - is John McCain.
No matter what your politics are, you must come to realize that in order for you to do well in this economy, you must have a government that does not devalue your currency, encourages job growth, and lets you keep more of your own money.
If the economy and your financial future are the most important subjects to you this election, please explore this site and discover the truth about America’s economy, and what we need to do to fix it.