“One of Obama’s specific proposals is to raise the capital gains and dividend taxes to 25%, which will sharply increase capital confiscation as increasing percentages of “gains” will reflect inflationary depreciation of the currency. In the U.S., an investor must pay tax on the difference between the sales price of an asset and it purchase price, with no adjustment for inflation. Consequently, when the tax rate and inflation are high, a large portion of the “capital gain” is illusory. Any asset that appreciates by less than the rate of inflation will result in its owner losing purchasing power and having to pay taxes on the illusory gains. At Obama’s higher tax rates, (he has suggested that capital gains and dividend taxes should be hiked to as much as 25%,) capital confiscation would result from modest levels of inflation.

And the Great Credit Crunch implies that inflation will be far higher than in recent experience.

Setting aside whether it is moral or equitable to force a small fraction of the population to essentially pay for the whole cost of government, much of which entails the shuffling of checks to purchase votes of various aggrieved groups, there is a bigger question. Can it be wise for the whole fiscal regime to stand on the shoulders of a small group, like a pyramid tottering on its point, so that any tribulation which undermines the prosperity of those who pay would promise to bankrupt the state?”

The Danger Lurking Behind Obama’s Tax Policy

Obama says his income tax plan will lower taxes for 95% of Americans. There is just one problem with this, 40% of Americans already pay no income tax. Obama’s response to this is that these people pay Social Security tax. Well, that’s not income tax, but a contribution to their retirement plan. So if he wins and implements his tax plan, for the first time in the history of Social Security, 40% of the people who will get retirement benefits will have paid nothing for them. Social Security will then loose all pretext of being a retirement plan, and will become a national welfare program.

This will cause Social Security to lose public support in a massive way. Leave Social Security contributions out of income tax plans. If you take some peoples income taxes to pay others Social Security taxes, Social Security will be destroyed forever.

http://strategicthought-charles77.blogspot.com/2008/10/obamas-tax-plan-will-destroy-social.html

People are ALREADY encouraged to not better themselves in any way – People on Welfare who depend on that money can’t make x amount or they loose it. People receiving Social Security can’t earn much money or they loose it. Obama’s plan is encouraging people to work harder by making so that they get to get back a lot more of what they put in.

I don’t get multi-million dollar bonuses for failing. What kind of problem do you have with me getting $500.00 (tax break) just for keeping my job? I will probably still be paying taxes, just not as much. For people who make less than me and don’t owe taxes in the first place, $500 is a LOT of money. Trust me, I was there for a long time, never earning enough to owe taxes. It may be the difference between being stranded and being able to get to and from a job.

As for subsidizing low-wage workers with various programs, I still worry about creating an entrenched class. Not that I think we should just leave such people to dangle in the wind, just that, if you’re not careful, people come to rely so much on the government that they lose the motivations they need to be more productive. This isn’t just a theory. Many European nations have a problem social mobility. For all our problems, we still have the most social mobility in the West. Particularly amongst our immigrants.

Ultimately, I don’t think there is a “pure” answer. Nor does one political philosophy have a substantially better grasp of the situation than another. It really is the kind of issue that will take the best minds to address.

So presumably you are in favor of Obama’s work-training program and research and development in terms of both providing better opportunities for people and a lasting stimulus to the economy? I am trying to figure out what, besides being opposed to tax credits, you want from Obama that he hasn’t already put on the table. It sounds like he addresses many of your concerns.

Also, a one-time short-lasting jolt is sometimes all that is necessary to spark the end to a recession. In its most basic, Keynesian definition a recession is when people start holding money and stop spending. Once you get people spending again, wa-la. I’m not in favor of using legal codes to influence the size or shape of our businesses either, I was just pointing out one method other nations have used to prevent large swaths of low-wage service workers.

See how this one sits with you. In a service-based economy like ours, where services account for approximately 80% of our economy, there will always be low-wage service workers. So if you want to improve their lives, with real, lasting effects, but realize that you can’t immediately change the structure of our economy, you can provide health-care, high minimum wages, bigger unemployment compensation or some combination of these or others. Wealth redistribution? Yes, but still welfare maximizing (welfare as defined by economics, not handouts). It also is going to be the only foreseeable way of seriously changing the lives of millions of low-wage service workers.

“shell game… deceptive.. finagle language… obfuscate…”

@Alan
You are being way too kind with your language here Alan. To say that writing government checks to people who are not paying taxes is a “tax credit” is Orwellian doublespeak of the first order. Want to hide a bad policy? Just change its name. Alan, here at Donklephant, Justin insists that we call this what it is – a bald faced lie.

Well, at least it is good to know what David Axelrod’s role will be in the new administration. He will be running the The Ministry of Truth -

“War is Peace,”
“Freedom is Slavery,”
“Ignorance is Strength.”
“Handouts are Tax Credits”

“So I expect to support Obama’s election. And then I expect to join the opposition…” – kritter

Sorry Kritter. Too late. For the next two years (at least) there will be no practical opposition. Full stop. None. Simple fact.

It is silly to think that this will be considered anything but a mandate and a blank check with no balance and no oversight. Whatever Barack wants, Barack gets. Whatever Pelolsi wants Pelosi gets. Whatever Reid wants, Reid gets. Whatever Rangel wants, Rangel gets. Whatever Schumer wants Schumer gets. Whatever Clinton … well … Hillary is going to have to ask nicely and say pretty please.

This is the way it works: Anyone who helped Barack goes to the front of the line and gets their cut. It is the Chicago way.

You have to be delusional to believe that (with 100 a vote majority in the House and a filibuster proof Senate) anyone in the Obama administration will care about any voices of moderation or opposition.

You will reap what you have sown.

Enjoy.

Asserts the moderate blogger: “William McGurn of the Wall Street Journal explains the accounting shell game of the Barack Obama tax plan. Here?s how it will work: Under Obama?s tax plan, 44% of Americans will owe no income taxes but many will get a …

I want the government to create more oppportunity through schooling, childcare, etc. that will give people a real chance to pull themselves up. Some people won’t take advantage, but that’d be their choice and not because they’re trapped (which is a problem currently). Creating opportunity is a lot different than the government fiddling with markets.

As for stimulus, I’d prefer the government invest in things like infrastructure which has real, measurable results rather than just handing out money, which has proven only to give the economy a one-time, short-lasting juice.

And, as for small business vs. big box. I shop local when I can but other than zoning restrictions to preserve historic areas, I’m not in favor of outlawing the Wal-Marts. Their cheap products help poorer people stretch their dollar. And while you could argue that more small businesses would mean better jobs and thus fewer people needing to stretch their dollar — that’s the kind of market engineering project I’m against. Too many risks for unproven rewards.

You are talking about the structure of our economy not the business cycle when you talk about low-wage service jobs. It looks like you give away your liberal leanings, because while even conservatives might be open to government intervention in the business cycle (i.e. a stimulus) tampering with the market is not something they are comfortable with.

There is nothing we can do about low-wage service jobs, there is obviously a high demand for them and the supply is even larger than the demand, it is likely only the minimum wage keeps the wages where it is. I would also hesitate to place low-wage service jobs lower than other jobs, like low-wage manufacturing, low-wage agricultural or construction jobs. I would like to see a US economy based more around small business than large box corporations, but that is a value judgment and involves serious government intervention (the type France has done to maintain its city culture).

I guess what I wanted to say before was that the stimulus is a way to make the American economy better, not low-wage service workers lives better. Is that not how you view it?

I wish I had a great plan. Now, something like infrastructure investment is a very strong stimulus idea that I think could get bipartisan support. For one, we need to invest in our infrastructure before it gets to the point of collapse and costs a heck of a lot more. But what makes it great stimulus is that construction can’t be outsourced to China. The jobs are created here and stay here. Yeah, the awarding of contracts could open up opportunities for corruption, but I think the net effect would be very positive.

However, that’s stimulus and not permanent. In the long-term, we have to find a way past the situation where a signficant part of our populace stuck in low-wage service jobs with no hope of advancement. I don’t think it’s sustainable to subsidize these workers with government funds because it would create an entrenched service class. This is not as easy objective. But I wish I knew of more people developing creative approaches. I’m sure there are more ideas than I’m aware of.

Maybe it is a political ploy, think Clinton in ‘93.

Avinash: you know who benefits most from putting more money into the pockets of poorer Americans? Wal-Mart. And Wal-Mart is not exactly creating a lot of good jobs. So, while your plan would improve people’s lives to a small degree, the money would not necessarily end up stimulating the economy in the kind of ways that lead to greater wealth for more people. I don’t have a solution, but I think we need a more robust and creative approach than just shuffling money around. When I allow myself to drop the skepticism, I find myself thinking that Obama has the kind of keen inteligence and right intentions to lead us along a much wider path than he’s laid out in his tax plan. If I vote for him, that will be why. Potential.

College tuition credits and child care credits are part of Obama’s tax plan.

And I agree with Alan’s other point as well. It’s bascially the policy manifestation of

Give a man a fish, feed him for a day. Teach a man to fish, feed him for life.

If we give money directly back to the poor at the expense of social security funding, we exacerbate the SS problems and we create a new subsidy. If we give extra money to “underemployed” folks making $9.50 an hour, where’s the motivation and the training resources for them to become qualified for a $15/hour job.

Avinash, do you really think that the economy wiull be encouraged by putting more spending power in the hand of people most likely to purchase commodities and other essentials? I don’t say the following simply for the sake of being glib, but we won’t turn around the economy on the strength of increased purchases of kraft macaroni and cheese and gasoline, and more rent paid on time. This is not to say such things would not constitute a relief to the folks benefitting from it. But no one who has studied such matters seriously thinks the economy would be spurred by such actions.

In other words, make the moral argument and you don’t get much quarrel from me. But the economic argument doesn’t hold water.

If we really want people to be able to better themselves, we have to increase opportunity. Giving them cash doesn’t do that. Giving them student loans (or grants), childcare, retraining, etc. will allow those people a better chance of getting out of their situation. Income inequality cannot be remedied by shuffling cash from one group to another — not in any meaningful way. We have to consider other means of helping the less fortunate. Obama sees the 21st century problems, but he’s using too many 20th century tools.

We can’t all be business owners.

gerry: fair points, but the McCain healthcare credit is funded differently by taxing people on their employer provided benefits (that exceed $2,500 per individual per year) and by making some magical fantasyland cuts in medicare and medicaid that won’t also cut benefits. Plus, since the money is targeted for healthcare, it’s not just taking money from one person and giving it to another.