I think it’s important, for the boneheaded right wing nutjobs that want to attribute “socialism” to Barack Obama’s plan that we all know the truth. Today McCain called Obama the “Redistributionist In Chief,” further going on to try to tar Obama with a brush of Socialism that wants to “spread the wealth” in a way that borders on Communism
First, forget the Joe The Plumber, the campaign’s noise and other horsepoop, let’s deal with reality. My arguments are taken from factcheck.org, politifact.org and cnn.com, as well as my own formidable knowledge of tax law and procedure. If you think CNN stands for communist news network, then you might as well find another blog to read immediately.
Unless John McCain intends to dismantle the entire federal government and fire himself on January 21st, 2009, then by his own definition John McCain is a redistributionist and socialist. Any government AT ALL that has the slightest tax base is a redistribution system and, therefore, again, by the McCain camp definition, socialism. Obviously, John McCain simply wants to redistribute tax dollars in the way that HE sees fit rather than the way Obama sees fit. In any case, this does not represent socialism any more than public schools do – so if you want to argue that point go ahead. It’s silly and meaningless hot air trumpeted by the right wing to perversely twist up the difference between Obama and McCain.
Now, the facts about how your taxes will increase if you make more than 250K/year.
For anyone that knows the tiniest bit about taxes (again, I know my way around this issue quite substantially) you are taxed on brackets of money, not the entire sum. Let’s use really really simple examples: let’s assume a ridiculously simple progressive tax system so that I can make my point:
- If you make less than $10,000 per year you pay nothing
- If you make $10,000 -> $19,999 per year you pay 10%
- If you make more than $20,000 per year you pay 20%
This mechanism became clear when we received the stimulus package earlier this year. How is it that EVERYONE received a check for $300/$600 or more? That’s because the “refund” was attributed to the lowest 10K of earnings, making it so that anyone that made more than 10K/year “paid too much” and was due a refund. Confusing, I know, but that’s how they make it work and make it fair.
Again, ridiculously simple so that I can make my point. This year, you make $23,000, so how much do you pay?
- You pay $0.00 on the first $10,000 you made
- You pay $1000 on the money made between 10K and 20K ie., 10% on 10,000
- You pay $600 on the money made about 20K, or 20% on $3000.
So in this example, you would have paid $1600 in taxes. I make this example because Joe the Plumber (stop with the “He doesn’t really exist” and “He’s not really a plumber,” not germane here) said the company he wants to purchase makes 270-280K/year. Although I can’t do the exact calculations because it’s a little tricky, essentially, here is the breakdown:
- He will get a tax break on the first $150,000 made by the company
- He’ll get the same rate as today on the money made between 150K and 250K
- He’ll pay not 35% but 38% on the amount above 250K – the return to the old rate is a bump of 3%.
This means that Joe the Plumber will pay and additional 3% on the 20-30K made per year in his new business, essentially a difference of $900 if it’s on the high side. However, because the way our tax system works, that particular amount will probably still equal a tax break for him, because the tax break on the lowest $150K will still probably be larger than $900. Taxes revenue kicks in really substantially when an entity is making considerably more than 250K/year.
What price, socialism? In this case, it’s $900. Why don’t we hear it this way from the pundits and the candidates themselves? As you just read, tax code is complicated and makes a difficult story. But the McCain camp is using that very story-difficulty to make the case that Obama’s plan is horrible and gonna cause enormous difficulties for our country. To be really clear: The top earners in the country will return to the tax brackets that they were at during the Reagan and Clinton administrations, on the money greater than $250K/year that they earn. Is “burden” too great for our top earners? I dunno, seems that during that tax bracket layout we had some pretty great times during the early Reagan years and the Clinton administration. I’d say that history, as a guide, is unkind to the McCain argument that this is an unfair burden to our wealthiest corporations and people.
To paraphrase Kennedy, “If this is what they call socialism, then I am a socialist.” People please wake up and do your own fact checking. This campaign is so far off the truth scale it’s just not even funny. This stuff is neither partisan or biased by my clearly-liberal leanings.
It’s our current American reality. You’re welcome.
Perk you did a pretty good job of simplifying the core way that taxes work in a progressive tax system like ours.
I am amazed how often I get into a tax conversation, usually political, and people don’t understand how it works, at the basic level. So many people think that if they earn $1 into the next bracket that they will have to pay that bracket of tax over all their earnings, instead of just on that $1.
As you point out, thats not true. If we simplify and use two tax brackets for an example, such as 32% for over 250k and 30% for under 250k. If I PROFIT $249,999 I pay $74,999 in taxes. If you earn $251,000 you pay $75,319, only $320 more. You do not pay $80,320, which would be the 32% applied over all your money.
This concept is so lost on so many, it’s actually a bit sad. I find it a bit annoying that they don’t teach it in school. Frankly the only reason you and I know so much (you knowing way more of course) about how it works is because we are self employed and do not go to H&R block, and do not take our accountant’s “word for it”. I double check everything they do for me, when they do, though recently I have been doing my own taxes.
I also don’t know why people think that any tax system is not a redistro of wealth. You take a percentage of money from people, and put it into things that benefit everyone (generally). Perceived benefit is often less than actual benefit, such as the fruit fly research stupidity, but it is for the benefit of all. So how is it that a poor person who pays no taxes, drives on a road paid for with the tax dollars I contribute, not considered a redistribution of wealth? My wealth is paying for the road they drive on, or the school they go to, or they police the call upon, or the library they get free books from.
Nicely followed NB – I particularly like the no-tax-paying-slob-drives-on-roads example, which just really clearly illustrates how redistribution works. And although I do have a few years on you, I’d not bet against you on a knowledge of tax law/code/procedure either
I agree also that people should learn tax code, however this does not really favor the government: so long as people are ignorant to the whole deal they can both be bilked for more than they would need to pay if they understood, and taxes can be used as a political wedge, as it is now – frankly, for both parties.
So I’ll tell anyone that wants to know, but for the most part, the bonehead rightwingnut W2s are paying for nicer roads for both of us
Forget to tell you also BD that I loved the the fruit fly research point at your blog, well played and so very true.
I’d like to link to it here for my readers, but can’t seem to find the reference – would you mind posting the link to that post/comment set please?
I would also like to add that it frustrates the hell out of me when I hear people who don’t have kids, complain about their tax dollars going to schools! (Being an ex-teacher, budgets were continually cut and I used 1/2 of my ridiculously small paycheck to pay for things I needed for my classroom.)
Don’t they realize that someone paid for them to go to school? What about the many families like ours who have paid hundreds of thousands of dollars to send our kids to private schools and don’t get any tax benefit from that? AND we still get to pay taxes for public schools! I know it was our choice to go the private route (AZ is 50th on the public school ranking list)….but it is a shame that people don’t understand the importance of good schools, good teachers and paying teachers what they deserve!! I couldn’t afford to stay in teaching and I know many good teachers who left the system for the same reason. Such a damn shame!
An excellent point PH and so very true.
I just saw an interesting thing on CNN which allows you to calculate your total refund If Obama’s plan were to come to fruition. I think it’s important to note that I don’t put any stock in the notion that this would actually happen, since we are in such trouble – but I like the direction that they are going. Especially in contrast to the John McCain plan.
Here’s the link: Obama’s Tax Cut Calculator
hmm i cant seem to link to comments in my blog. i must have broken it lol.
The takeaway for me is that they do not grasp the avalanche effect of research and as such, improvement of any program that is a longer term prospect.
Education will make us more competitive and able to compete at the global lead we have been for some many years, but only years from now. Education is not for today, it is for tomorrow. We currently do not have education in this country. We have information memorization.
Healthcare that works, and is available to everyone, allows for a more healthy workforce, which results in more years of earning, so more taxes. I also results in less sick days, so more taxes. But more so, a healthy population is a happy one. Less violent crime, because of less desperation.
comment #12
http://braindonkey.com/blog/article/mccain_campaigner_beaten_hoax/
to your point about W2′s paying for roads. It would seem they need to pay a little more… Bridges scare me now… lol
Well spoken, sir.
I wish I had something to add.
VSloathe… speechless?!?!?! That’s extraordinary!
roflmao: