Obama to Lower Income Taxes for 95% when only 67% pay...?

[ParanoiA]

I'm guessing no. It would hurt the argument and foil the misdirection.

 

 

Some families with an income of $40,000 could lose up to 40 cents in vanishing credits [/b']for every additional dollar earned from working overtime or taking a new job. As public policy, this is contradictory. The tax credits are sold in the name of "making work pay," but in practice they can be a disincentive to working harder, especially if you're a lower-income couple getting raises of $1,000 or $2,000 a year.

 

Did you consider the vanishing credits which goes with the marginal tax rate argument?

 

Also, I didn't see anywhere in the article where they said low income earners will have a higher tax liability. I think they're beef is that the marginal tax rate "spikes", implying they believe it shouldn't increase at all, or at least more subtley. I can see where they have a problem with this. Sure a person's total liability is lower, but that rate is a little concentrated just after 25K. It would be akin to saying that there is zero liability up to 50K, but every dollar after that is 30%. It's a little weird to go from zero and jump up to a rate like that. At least, I think that's their argument.

 

And from your link:

 

What accounts for the higher rates? First, Obama expands the maximum child and dependent care credit for families with one young child from $1,050 to $1,500 and phases down the credit over a longer income range, from $30,000 to $58,000. Throughout this income range, the credit is phasing out at a rate of $30 per $1,000 of income, thus raising the effective tax rate by 3 percentage points. Obama also makes certain credits refundable, which introduces a tax penalty of 10 percent or 15 percent, depending on the income bracket.[/i']

 

Clearly they're making an argument that analyzes the marginal tax rate with his proposed tax credits, not in absence of those credits.

[waitforufo]

Clearly they're making an argument that analyzes the marginal tax rate with his proposed tax credits, not in absence of those credits.

 

Thank you. Credits vanish as income increases thereby increasing the marginal rate. I thought the article was clear.

 

Since my last post, most seem to be ignoring the fact that these "tax credits" are just a government money give away. People will be given a tax return for money they never paid in. How long can our nation survive if people can just vote themselves money?

 

Democrats tell us that this tax return is to offset payroll taxes for Medicare and Social Security. So, in other words some people have to pay for these benefits and others don't. Both of these entitlement programs are near bankruptcy and the Democrats are trying to figure out ways to make sure less people are paying in. Brilliant. Foolish for me to assume that people are entitled to these entitlement programs because they pay for them.

 

The WSJ article they mention a "clean car" tax credit of up to $7,000 on the purchase of certain vehicles. This is the one tax credit is not extended to people who pay no taxes. Who do you really think will receive this clean car credit? My guess, no one. Why? Because if you make enough money to purchase a clean car you will be "phased out" from tax credit eligibility.

 

For many if not most, this will also be true for the $4,000 tax credit for college tuition. If you can afford to spend $4000 on sending your child to college, you will likely find that you have too much income to be considered eligible for these tax credits.

 

A 50% tax credit for saving $1000? How will this one be figured out? Again who will be eligible for such a credit? Do people who pay no taxes save money?

 

So, targeted tax cuts but targets with no bullseye. In the mean time people will be actually working to fit themselves into daddy government's social engineering plan. Pathetic. Why not just make money and live free?

 

ParanoiA, with regard to "McCain taxing benefits for the first time ever." I believe you are referring to ads saying McCain wants to tax medical benefits for the first time ever. Currently in the US you are not taxed on medical insurance costs paid by your employer. Those without employer paid medical insurance pay taxes on all the money they use to pay for their insurance. McCain has proposed a tax credit for medical insurance costs. Under the McCain plain the cost for all medical insurance paid by the employer and the employee would be considered employee income. This increase in income would be offset by a tax credit. This would put those paying their own insurance on an equal footing with those who receive medical insurance as part of their employment compensation. I believe it is primarily unions that are against this plan.

[iNow]

Since my last post, most seem to be ignoring the fact that these "tax credits" are just a government money give away. People will be given a tax return for money they never paid in.

Not at all a bad thing when the credit is for buy solar power for your home, or increasing its energy efficiency, or sending your kid to college, or ad infinitum. Try taking a longer view on this one. It seems much less nefarious when put into the larger context of global health and societal advancement...

[swansont]

Did you consider the vanishing credits which goes with the marginal tax rate argument?

 

Also, I didn't see anywhere in the article where they said low income earners will have a higher tax liability. I think they're beef is that the marginal tax rate "spikes", implying they believe it shouldn't increase at all, or at least more subtley. I can see where they have a problem with this. Sure a person's total liability is lower, but that rate is a little concentrated just after 25K. It would be akin to saying that there is zero liability up to 50K, but every dollar after that is 30%. It's a little weird to go from zero and jump up to a rate like that. At least, I think that's their argument.

 

And from your link:

 

 

 

Clearly they're making an argument that analyzes the marginal tax rate with his proposed tax credits, not in absence of those credits.

 

I did consider the vanishing credits. It's still an intellectually dishonest argument, based on the idea that someone with, say a 30% marginal tax rate about to tick up to 35% would refuse a raise or not work harder, because they would be paying an extra 5% in taxes on the increase in income.

 

They even admit "For that matter, it’s hard to know how much phase-outs actually discourage people from earning additional income."

 

You always end up with more in your pocket if you have a higher income. Until they can show that the marginal rates are actually having an effect, the whole argument is specious. And since the marginal rates already have dramatic changes, they should be able to back this up. Are people currently earning ~$46k refusing raises, because of the 15% jump in the marginal rate on the new income? If they aren't, the whole argument falls apart. (And I've been there — I certainly welcomed "graduating" into the 28% tax bracket from the 15% bracket, years ago)

 

And if there's a spike in the marginal tax rate at $X, it doesn't really matter to you if the tax curves are smooth or spiky if you are making more than $X — what matters is the total tax paid.