Obama's Tax Cut for the Rich (and Red)

You are exactly on the mark. The interesting thing will be - over a long period of time - to watch the migration to the "flyover" states. I suspect that the moderates in those states will move, leaving Northeast and West even more lopsidedly far left. Taken to the extreme, these areas of the country will become extremely stratified between very rich and very poor.

YOU ARE SO RIGHT!!! I live in the Greater Boston area - my husband and I make close to $150K combined and have a small older home (built in 1954 $320K 2 years ago - 3 bed, 1 bath) and are barely saving a dime because of our cost of living - give me the same salary in Kansas and I'll be living LARGE!!!

Thank You Brian! It is about time someone explores the relativity of state economies. I live in California. It is frustrating to pay Federal Taxes compared to other states whose cost of living is half that of California. Why isn't this discussed more often? Equal standards of living with completely different costs and values demand different economic classifications. The cumulative state taxes in California are one of the highest in the US. Obama's simplistic plan to tax our way out of finacial problems and make the US population more dependent on our government to provide services scares me! We are taxed too much already! I would like to see more articles like this one that brings common sense analysis to "Dreams of Change".

I fail to see the “incentive to hire fewer workers” by an increase of small business owners income taxes from 33% to 36%. A small business would of course rather have the lower tax rate, we all would. But I don’t believe it reasonable to say a small business owner who grosses say a million per year and nets $200,000 views the tax increase as an incentive to hire fewer workers. I’m a CPA, and I know business owners try to maximize profits. A business will hire a worker who will produce a pretax profit through his production. A business owner does not decide that he used to make about $30,000 profit by hiring another electrician or plumber, but now since the tax hike he makes 3% less or only $29,100 extra profit. So does he think that is so much less it’s not worth it? I don’t think so. If a business can make more profit, they will add a worker. Taxes are on profits, not on the number of workers you have on your payroll. There is no disincentive here. If a worker adds enough productivity to increase your pretax income, he will add to your after tax income.

Extreamly well written. Most can't argue but will find a way to put holes in it. It seems you have given a lesson in economics 101....or is that really politics 101? Too bad people just don't understand due diligence. I have said all along this is always about class warfare. Not suprising that the poor vote democratic because let's face it, they are living hand to mouth in the countries biggest cities with the most delegates (thats another story you should write) and it's "seems" compelling when one is poor and someone wants to give you everything you need in exchange for a vote. Of course all this does is promote being lazy and complacent and all at the expense of hard working and risk taking and job providing citizens/small business owners like myself. Classic case of biting the hand that feeds them. It still comes down to interpretation of classes combined with demographics.

THE OBAMA TAX PLAN WILL RESULT IN A NEW SYSTEM OF THE PREVIOUSLY FAILED "WELFARE STATE". "SPREADING THE WEALTH" WITHOUT REGARD TO REGIONAL COST OF LIVING IS BAD POLICY AND WILL SIMPLY LEAD TO A NEW FORM OF INEQUITY WITHIN OUR TAX CODE. WE NEED TO WAKE UP AND DEMAND THAT OUR REPRESENTATIVES REDUCE THE SIZE AND COST OF GOVERNMENT AND PAY DOWN OUR NATIONAL DEBT. WE SIMPLY CANNOT AFFORD THE GOVERNMENT WE HAVE BUILT. IF YOU AGREE,PLEASE TELL TEN PEOPLE.PLEASE REMEMBER TO VOTE "EARLY AND OFTEN".

Any economic concept Barrack Obama proposes demonstrates his lack of education and experience in financial matters. Why should anybody expect a person with an education in law, a part time job as a state Senator, and an uncompleted first term as a U.S. Senator to understand complex economic issues? What's worse is how can so many people believe he can? People say they wish they were younger. I was 70 three weeks ago and I'm damn glad I it wasn't 40.

Brian, You are absolutely right. If this country votes for higher taxes, we will get what we deserve. Citizens should be up in arms about this and telling all their neighbors and friends. Obamalovers are a lost cause. When someone puts ideology above truth, it will take an act of God to help steer them back.

Before you get all teary eyed for the Boston family having to pay $1800 more in taxes every year, remember that the absolute dollars they will earn in appreciation on their house over the long haul is substantially more. If real-estate appreciates at an average of 3% a year in both markets, the Boston couple's net worth will increase $15,000 more than the KC couples EVERY YEAR. In 30 years the Boston couple could sell their home, move to KC, pay cash for the house next door to the KC couple, and still have 1.2 million left over. And that's if you assume real estate values in the two areas will appreciate at the same rate. Chances are that the Boston couple will see a higher rate of appreciation over the long haul than the Kansas City couple. But hey, if $1800 a year is that big a deal to you feel free to leave either coast and come to the midwest. We have plenty of room for you!

After November 4th, if we have a Democratic House, Senate and White House taxes will be the least of our problems.

Excellent article. I'm sure the blue state wealthy agree totally with you, but they are out voted every election by the lower wage earners. Same thing happens in my state of Minnesota. I suppose since its nearly impossible to create a cost of living set of tax rates for each city in the US the next best answer would be to raise that $250,000 number to, say, $750,000 or something around there. But...if the Democrats and Obama did this then, of course, there would not be enough new revenue to "spread the wealth" to the 38 million tax filers who pay no income tax anyway. We all know, or should know, that the democrat's claim to "reduce taxes on the middle class" is just another election year lie or at best a large exaggeration to get votes.

This argument might have traction with those who live in high cost-of-living areas, but it's a non-starter for the rest of us out here in the hinterlands. I can point out for starters that tax rates in high tax jurisdictions aren't forced on them by the rest of us, as a matter of fact, they are subsidized by the rest of the country through deductibility in the federal tax code. I think there is little danger of mass migration from the northeast or Califonia or Hawaii into the Midwest. Those who live in New York or Boston will tell you how superior their cultural landscape is to the rest of the country. They may be right. California and Hawaii enjoy wuch better weather than most of us. These things have value to those who live there. And to those who live elsewhere. Witness the numbers of people who flock to these places on vacation. How many people long to spend time in Kansas, anytime of the year (no offense meant to Kansans). If we index income taxes for these areas for cost-of-living, we might also have to impute a certain amount of "hedonic income" to those who live there. I don't expect that many people from Washington D.C., New York, San Francisco, or Honolulu will be moving to the Dakotas soon (again, no offense to Dakotans of either stripe). from Mesa, Arizona

Bravo. Good analysis.

Of course, a FLAT TAX would solve all of these inequities.

This is looking at one aspect of the Obama tax plan - to raise taxes on those making $250,000 per year verses a tax cut on those making less. There is another side on this - the lower income side. With refundable tax credits (I believe that this is the correct term, but please forgive me if it is not), more people who pay notaxes will actually receive a check from the government. This is already the case with the Earned Income Tax Credit, but under the Obama plan more people (including some people who already receive checks that will get more) who pay no taxes will receive a "refund" greater than what they pay. This may be a different topic, but it is another example of the redistribution of wealth - the rich pay more and it will be given to the poor. I'd call is socialism, but if you do that, then you would have to say that we're already socialistic; this makes it more so.

I just ran the Obama tax calculator and found I would get over a $1200 tax cut (for now). Since I got around $2000 with the Bush tax cuts that expire in 2010, I lose $800 overall. And that's if Barney Frank and others don't get their way and raise taxes in the meantime. The $500 tax credit for retirement savings means nothing to me. I'm within 5 years of retiring. One tax increase from these guys will eat that up. BTW, the $0 tax cut shown in the calculator for the McCain tax plan may be true. But I don't lose $2000 in 2010 either.

Obama's plan is a ploy to get votes. Do you really think that the majority of middle class democrats go along with this plan? If they do then they are more screwed up then I thought.

I agree that a tax hike on small business will not put people out of work nor will it prevent businesses from hiring more employees. The point that seems to have been missed is that a business owner is not going to just eat the loss caused by an increase in taxes. He or she will most likely raise their prices by the tax amount to maintain thier current profit level. I do not have a problem with taxes in and of themselves. They are needed to fund services that are required for a civil society (e.g. police, fire protection, education, national defense, infrastructure.) The biggest problem regarding taxes is the irresponsible manner in which we are allowing the government to spend our money. Raising taxes to fund better education, more public safety officers, and better, more efficient infrastructure I believe we could all agree on. It is only when someone speaks of taxing in order to level the field that I really become concerned. Increasing taxes for this reason becomes a dissincentive to success. Why would one strive for success if only to be punished for it. One can work as a drone and keep $.85 of every dollar earned or one can work hard, do well in school, get scholarships to college or take out loans, graduate, marry, and be tosssed into a tax bracket that only allows you to keep $.595 of every dollar you earn. Throw in increased taxes on investments and you could be rewarded with better than half of your income being pilfered by the government to compensate disproportionate income for someone who did not take the innitiative to better themselves.

One more vote for the Fair Tax. Anyone with a lick of sense knows that the fair tax is the only way to take class distinction and cost of living differences out of the equation.

We need two things in this country. Flat Tax and Term Limits. And, maybe we should prevent anyone who is a lawyer from serving in Congress or the White House as an elected official.

Also, does anyone else find it odd that Warren Buffet and Colin Powell have endorsed Sen. Obama? Sen. Obama has asked how he can be a socialist but be endorsed and funded by the wealthy. (Buffet $62.3 Billion est. net worth, Colin Powell $28.2 Million net worth.) The answer to that is that those who have already earned their wealth will not be as greatly affected as those who are trying to build it now and in the future. the taxes on Buffets billions and Powells millions have already been paid. If Sen. Obama was truly interested in "spreading the wealth" he would be pushing the idea of seizing the assests and bank accounts of the super rich and redistributing those among the less fortunate. But lets be honest with ourselves. If that were the case Bufett and Powell and many highly ranked democrats would be voting for McCain in November.

We need to push for the flat tax, Huckabee had it right. It's the only true and fair way to do this. Just think how much money the goverment would save by abolishing the IRS!! And think of all the paper that would be saved! That should make the tree huggers happy too!

When will Americans wise up? Every election year we get the same dribble out of the politicians, about what wonderful things they are going to do for us by manipulating the tax code. They use it to buy votes, at the expense of whatever part of the population happens to be out of favor at the moment. In the end we all pay, so why not say "STOP IT RIGHT NOW"! The flat tax will never be instated because it would put an end to the politicians favorite weapon.

we have a flat tax now. Check out the Fair Tax plan. Everyone will pay the same thing rich, poor, illegal immagrant, drug dealers, prostitutes. Just think noone gets out of it. Not even congressmen/women www.Fairtax.org No whinning red states, it's youor patriotic duty to pay more taxes :o)

We need to replace the income tax with the Fair Tax on the revenue side, and a line item veto and balanced budget amendment on the spending side of the federal government. Then, a president could be truly held responsible for the economy during his administration. Under our current rules, politicians campaign on promises to change the tax code to favor a majority of voters, and incumbents in congress buy votes with earmarked pork hidden in omnibus spending bills that bloat government spending because they can't be vetoed without shutting down the government.