Obama's 95% Illusion

It depends on what the meaning of 'tax cut' is.

One of Barack Obama's most potent campaign claims is that he'll cut taxes for no less than 95% of "working families." He's even promising to cut taxes enough that the government's tax share of GDP will be no more than 18.2% -- which is lower than it is today.
It's a clever pitch, because it lets him pose as a middle-class tax cutter while disguising that he's also proposing one of the largest tax increases ever on the other 5%. But how does he conjure this miracle, especially since more than a third of all Americans already pay no income taxes at all? There are several sleights of hand, but the most creative is to redefine the meaning of "tax cut."
For the Obama Democrats, a tax cut is no longer letting you keep more of what you earn. In their lexicon, a tax cut includes tens of billions of dollars in government handouts that are disguised by the phrase "tax credit." Mr. Obama is proposing to create or expand no fewer than seven such credits for individuals:

- A $500 tax credit ($1,000 a couple) to "make work pay" that phases out at income of $75,000 for individuals and $150,000 per couple.
- A $4,000 tax credit for college tuition.
- A 10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).
- A "savings" tax credit of 50% up to $1,000.
- An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support. (the only good news I can personally find in this plan)
- A child care credit of 50% up to $6,000 of expenses a year.
- A "clean car" tax credit of up to $7,000 on the purchase of certain vehicles.
Here's the political catch. All but the clean car credit would be "refundable," which is Washingtonese for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer -- a federal check -- from taxpayers to nontaxpayers. Once upon a time we called this "welfare," or in George McGovern's 1972 campaign a "Demogrant." Mr. Obama's genius is to call it a tax cut.
The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation's Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.
The total annual expenditures on refundable "tax credits" would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center. This means that the tax-credit welfare state would soon cost four times actual cash welfare. By redefining such income payments as "tax credits," the Obama campaign also redefines them away as a tax share of GDP. Presto, the federal tax burden looks much smaller than it really is.
The political left defends "refundability" on grounds that these payments help to offset the payroll tax. And that was at least plausible when the only major refundable credit was the earned-income tax credit. Taken together, however, these tax credit payments would exceed payroll levies for most low-income workers.
It is also true that John McCain proposes a refundable tax credit -- his $5,000 to help individuals buy health insurance. But the big difference with Mr. Obama is that Mr. McCain's proposal replaces the tax subsidy for employer-sponsored health insurance that individuals don't now receive if they buy on their own. It merely changes the nature of the tax subsidy; it doesn't create a new one.
There's another catch: Because Mr. Obama's tax credits are phased out as incomes rise, they impose a huge "marginal" tax rate increase on low-income workers. The marginal tax rate refers to the rate on the next dollar of income earned. As the nearby chart illustrates, the marginal rate for millions of low- and middle-income workers would spike as they earn more income.
Some families with an income of $40,000 could lose up to 40 cents in vanishing credits 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. That's the American way! Get penalized for working hard to make a better life for your family! Oh, wait...??? Huh???
One mystery, among many, of the McCain campaign is why it has allowed Mr. Obama's 95% illusion to go unanswered. With any luck, one of you will have better luck at getting McCain & Co. to read this blog AND WAKE UP AND START MAKING SOME NOISE!!!
Have a great week and stay focused, capmers. There’s only 22 days left to make or break this country!!! Have you called your favorite local politico to volunteer???

To Blog...Or not to Blog?

Due in large part to the events both political and financial that have taken place in recent months and weeks, my mind has been plagued by thoughts that I, as a "bitter, God fearing, gun-toting" American patriot should be doing more than merely watching Katie Couric and lamenting with the "guys" at the water cooler the next day about the sad state of affairs we find ourselves in these days. Though I have always considered myself to be knowledgeable and informed of current local, national and world events, I have often lamented not having served in the armed forces as a young man or having been more politically involved in years past, as a way to "do my part".

So, why blog? Well, I can explain it this way. Have you ever seen the movie “Boondock Saints”? There is an opening scene where the minister says “...We all must fear evil, but the evil we must fear the most is the indifference of good men.” I believe that being indifferent about the political landscape of our day will have long lasting negative effects on our future. As a simple guy with a wife, two kids, two dogs, two jobs, a quickly deteriorating house and church responsibilities this is about all I can contribute right now...and I figure it's better than gripping or debating my clueless liberal neighbor.

As I stated earlier, I have over the past months and weeks felt divinely inspired to "make a difference" by not only the events "du jour" that seem to be dragging this nation down speedily, but also by my wife-the energizer bunny, and my two very energetic and unceasingly inquisitive boys, for whom I hope to leave this world a better place.

So, for me this Blog is my way of, at the very least, voicing my opinion and sharing thoughts and ideas of what is going wrong and what we should do to stay the course that our Founding Fathers prescribed. Though I have many, (my parents being first and foremost) my heroes include John Adams, Benjamin Franklin, and Thomas Jefferson. "E Pluribus Unum" was the motto proposed for the first Great Seal of the United States by these three icons of freedom and liberty in the summer of 1776. A Latin phrase meaning "Out of many, One" the phrase offered a strong statement of the American determination to form a single nation from a collection of states. Over the years, "E Pluribus Unum" has also served as a reminder of America's bold attempt to make one unified nation of people from many different backgrounds and beliefs. The challenge of seeking unity while respecting diversity has played a critical role in shaping our history, our literature, and our national character.

It seems though, that while this great nation has grown over two centuries now that the phrase "E Pluribus Unum" has lost its meaning. Today our political landscape is littered with all manner of groups and fractions, each with diverse and often sinister agendas. The words of the early Prophets has indeed come true, for it is very difficult these days to decipher between good and evil. Often times what we perceive to be good, turns out, in the end to be vile. I would very much like to see this, "...One nation, under God, indivisible..." with one purpose and goal.

I think we can all agree that George Washington, our first President, was a great American. If anyone disagrees with this (and the Brits don’t count) then you’re an idiot. Not to be crass, but you simply don’t get it. Washington put his life on the line and had to watch (and command) many patriots to their death for a cause - a belief - an ideal. After he helped kick the Brits off our great land, he then, very reluctantly, agreed to serve as our first President. He came, kicking and screaming, for a second term of office, but refused a third. What a man! In his farewell speech to the newly formed idea of a nation, he addressed what he thought could be one of this country’s greatest downfalls - political parties. "It serves always to distract the Public Councils, and enfeeble the Public Administration. It agitates the Community with ill-founded jealousies and false alarms; kindles the animosity of one part against another, foments occasionally riot and insurrection. It opens the door to foreign influence and corruption, which find a facilitated access to the government itself through the channels of party passions. Thus the policy and the will of one country are subjected to the policy and will of another."

In short, Washington believed political parties were evil in nature. They were not in the best interest of our country unity and could eventually lead to our downfall. Ladies and gentlemen…I think we are almost there. If we are going to save ourselves from ourselves, we need to wake up and do more than gripe and moan and forward emails to each other about what's going on.

It's time to take a stand for what's right and take action. Even if the best action you can take is blogging. I, for one, have committed to volunteer for a few candidates campaign efforts on the local and national level in the coming weeks. Don't ask me where I'll find the time...these are the kinds of priorities we make time for. I urge you all to get involved as well, in whatever capacity you can this election season. Do some research and pick a candidate or two who you believe is making a difference and get behind him and support him, not just in voice, email, and lawn decorations. Get involved!

So feel free to check back here as often as you please. The blog will be updated weekly (or sooner) as the need be, or as my time is available. Tell me what you think - I welcome comments and criticism, though this won't be a forum for debate. State what you wish, but don't necessisarily look for a direct response form me.