Tuesday, April 15, 2008

April 15th – Obama tax warning day

There is a reason the investor class tends to be more conservative. We understand the markets. We understand how they work. We follow the ups and downs of the markets, and we learn from our mistakes. We understand financial statements and their interrelationships. We understand policies which grow the economy, and we understand policies that impede economic growth. We are concerned about increasing jobs, growing the economy and keeping taxes low. This enhances our net worth and in the process enhances the wealth of the nation.

Today is April 15th. Everyone is busy paying their taxes. Taxpayers are fuming while they are writing their tax checks to Uncle Sam. The post offices remain open until midnight while everyone makes their last ditch effort to file their taxes. If you are mad at the current amount you pay on your taxes, you should heed the warning what an Obama presidency will bring. Obama has promised to raise taxes, and the programs the democrats want to enact will cost a lot of money requiring an even higher tax burden imaginable. The government wants more power over you by taking more of your money. This will give them more control over you.

At the North Dakota State Democratic convention, Obama said the following to a crowd of 17,000 as he referred to the Republicans:

"You got a problem with health care: tax cuts. You got problem with education: tax cuts. You got a problem with the economy: tax cuts. Poverty: tax cuts. That's not a policy; it's a dogma, a tired and cynical philosophy,"

In one aspect he is right. It is a dogma. The problem is - it works! It worked under Kennedy. It worked under Reagan and it worked under Bush. It even worked for Mayor Guliani in the state of New York. Why the Democrats don't get this is anyone's guess?

Obama fails to understand the importance of low tax rates. He wants to increase corporate tax rates. That is the easiest way to incentivize corporations to move overseas. I thought Obama was the one who rails against jobs going overseas. Obama wants to increase the dividend and capital gains rate to above 25%. Obama wants to reinstate the estate tax because he erroneously concludes that the estate tax only affect ½ of 1% of the wealthiest individuals. I guess the wealthy are the only ones who die.

Obama says he wants to increase taxes on the wealthiest individuals. Capital gains and dividends affect everyone in every income class especially senior citizens.

According to the heritage foundation:

The wealthiest 1% of taxpayers (about 1.3 million in all) already bears a disproportionate share of the tax burden. In 2005, the latest year for which IRS data is available, they earned 21% of all the adjusted gross income. But they paid a whopping 39.4% of all the income taxes. And the 13 million households who earned more than $104,000 (the wealthiest 10%, who would bear the brunt of higher Social Security payroll taxes) accounted for over 70% of Uncle Sam's take

When you hear democrats talk about taxing the wealthy, hold on to your wallets. Those on the lower economic ladder pay no taxes or low taxes.

Next is the expiration of the Bush tax cuts. John F Cogan, and Glen Hubbard in their piece The Coming Tax Bomb explain it this way.

By historical standards, federal revenues relative to GDP, at 18.8% last year, are high. In the past 25 years, this level was only exceeded during the five years from 1996 to 2000. Still, we stand on the verge of a very large tax increase, one that will occur unless the next Congress and president agree to rescind it. Letting the Bush tax cuts expire will drive the personal income tax burden up by 25% – to its highest point relative to GDP in history.

twice as large as President Lyndon Johnson's surcharge to finance the war in Vietnam and the war on poverty. It would be more than twice the combined personal income tax increases under Presidents George H. W. Bush and Bill Clinton. The increase would push total federal government revenues relative to GDP to 20%.

Why this large tax increase? The tax code changes enacted in 2001 and 2003 are scheduled to expire at the end of 2010. If they do, statutory marginal tax rates will rise across the board; ranging from a 13% increase for the highest income households to a 50% increase in tax rates faced by lower-income households. The marriage penalty will be reimposed and the child credit cut by $500 per child. The long-term capital gains tax rate will rise by one-third (to 20% from 15%) and the top tax rate on dividends will nearly triple (to 39.6% from 15%). The estate tax will roar back from extinction at the same time, with a top rate of 55% and an exempt amount of only $600,000. Finally, the Alternative Minimum Tax will reach far deeper into the middle class, ensnaring 25 million tax filers in its web

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Today John McCain made an economic speech that was one of spending restraint and reducing taxes. This was an important speech in continuing to grow the economy. This is not the class warfare, protectionist, tax and spend policies that both Obama and Hillary have been proposing.

Heed the warning. Barack Obama is the emperor wearing no clothes. An Obama presidency will be a nightmare to all who pay taxes.


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