Tuesday, January 15, 2008

Deep in the Heart of Taxes

OK, so it’s a bad title, I’m a bit busy with the new semester, got another dog and I’ve been doing things unwise for a 47-year-old white-collar worker, like moving a piano and reinforcing my fence. Anyway, today’s article is about taxes, and more to the point, why you should be wary of how the Presidential candidates tell you they are going to make things better.

First, a capsule of how each of the major candidates says they will handle taxes if they become President:

Hillary Clinton:
Hillary promises to “lower taxes for middle class families”. She would do this by offering tax benefits to alternative energy research, by providing direct official government support for unions, and “return to the income tax rates for upper-income Americans that we had in the 1990s”. In short, tax increases on target demographics but no actual individual tax cuts are specifically promised for anyone, and tax revenue would be allocated specifically to increasing unions, establishing government control of personal savings, regulate the housing market with new laws and controls, creating a housing version of 'rent control', and reducing military budgets – Hillary whines regularly about the cost of the war in Iraq as if cutting the military would directly improve the lives of regular people. In short, more government and higher taxes.

The Club for Growth observes that “Hillary Clinton both voted against the 2001 and 2003 tax cuts”, and she also opposed their extension. The Club for Growth notes in particular the “class-warfare rhetoric and a bristling hostility towards the capitalist spirit”.

Barack Obama:
Obama promises “Tax Fairness for the middle class”. Obama would create a new tax credit of up to “$500 per person, or $1,000 per working family”. He would have government subsidize mortgages, by expanding the mortgage interest credit to non-itemized returns. He would increase the Earned Income tax credit and “eliminate Income Taxes for Seniors making less than $50,000”. Ironically, in addition to these complications, Obama also promises to simplify the process, noting that the “tax code has become too complicated”. Obama’s solution would be for the IRS to prepare tax forms for individuals to simply sign and return. The implication of this level of government scrutiny and control is breath-taking in its arrogance. Like Hillary, Obama would increase government spending on chosen goals, and like Hillary his solutions all mean greater government regulation and control. Socialism is evident in his description of how an Obama administration would control Human Resources at U.S. companies; “Obama has introduced legislation to help strengthen career ladders by first identifying regions and industries where career pathways are not fully developed and then establish public-private partnerships to lift up low-wage workers. Obama supports using the successful organized labor model of providing workers with additional skills and opportunities, and looks forward to working with organized labor to build more opportunities for low-income workers to reach economic security.”. God save us from comrade Obama!

The Club for Growth says that Obama’s tax positions are similar to Hillary’s, although he would be quicker to raise Social Security tax rates and expand the incomes subject to them.

John Edwards:
Edwards would increase tax credits for the poor and for children, and he would immediately and drastically increase capital gains tax rates. Like Obama and Clinton, Edwards’ idea of tax reform holds noo promise of a tax cut, even for the poor, but is based on punishing people who make money.

The Club for Growth says Edwards is “promising to eliminate the Bush tax cuts before they expire. Edwards has also promised to raise the capital gains tax rate to a whopping 28%-even higher than the 20% rate that applied before the 2003 tax cuts.”

John McCain:
McCain promises, like Hillary and Obama, to “cut taxes on the Middle Class”. McCain would repeal the AMT, require 60% of Congress to support any bill to raise taxes, and stop earmarks, but he also supports Social Security in much the same way it operates now.

The Club for Growth does not like McCain, warning of “the Senator’s vocal and class-warfare-laced opposition to the 2001 and 2003 tax cuts; his occasional but eager support for increased government regulation; his support for raising Social Security taxes; and his persistent attacks on political free speech in the form of the McCain-Feingold Act.

“The Bush tax cuts were a driving force behind the economic prosperity of the last couple of years and a cornerstone of a pro-growth philosophy,” said Club for Growth President Pat Toomey. “Not only did Senator McCain oppose these cuts, he aligned himself with the likes of Ted Kennedy in his rhetorical attacks in 2001 and 2003. Four years later, American taxpayers still have not heard the Senator disavow his misguided statements and votes.”

Rudy Giuliani:
Rudy promises “We’ll not only keep the current tax cuts in place or their equivalent, we’ll enact additional tax relief and give the Death Tax the death penalty. High tax rates hurt business and destroy jobs.” Rudy would lower the marginal tax rate, make the Bush tax cuts permanent, tie the AMT to inflation, and lower corporate taxe rates. He would also lower capital gains taxes. Like Hillary and Obama, Giuliani would create an R&D tax credit, and like Obama he says he would work to simplify the tax form.

The Club for Growth says Giuliani “successfully cut taxes; kept spending below the growth of inflation and population; instituted sweeping welfare reform; privatized and deregulated many aspects of the city's bulky bureaucracy; and fought aggressively for school choice."

Mitt Romney:
Romney’s campaign site does not have a link to any specific promises on taxes. His press releases, however, do shed some light on his views. One press release in January 2008 states that Romney would make the Bush tax cuts permanent, that he would “roll back tax rates across the board”, that he would change the tax rate “on interest, capital gains and dividends to absolutely 0%”, and that he would reduce corporate tax rates. Romney says he would oppose increases in Social Security tax rates, but does not explain how he would keep his promise to “strengthen Social Security”.

The Club for Growth says "Romney’s record on taxes, spending, and entitlement reform is flawed, it is, on balance, encouraging, especially given the liberal Massachusetts Legislature. His record on trade, school choice, regulations and tort reform all indicate a strong respect for the power of market solutions. At the same time, Governor Romney's history is marked by statements at odds with his gubernatorial record and his campaign rhetoric."

Fred Thompson:
Thompson’s campaign site is really light on details. Thompson says that the “tax code is broken and a burden on U.S. taxpayers and businesses, large and small. Today’s tax code is particularly hostile to savings and investment, and it shows”. Like Obama and Giuliani, Thompson says he wants to radically simplify the tax code, and Thompson says straight out he wants to eliminate the IRS “as we know it”.

As an aside, Fred’s site does not have a “search” feature, making it hard to seek out his opinions in detail. Fred’s got a lot of general principles, but it’s hard to get specifics.

The Club for Growth says Thompson has a “very good record on taxes, regulation, and trade”.

Mike Huckabee:
Huckabee wants to eliminate the IRS, and indeed has proposed the most radical correction of any candidate, in his support for the Fair Tax. His plan is simple; replace the income tax with a simple consumption tax.

The Club for Growth says Huckabee has a “liberal economic record as governor”, and that “Huckabee is proud of his tax hikes, his spending increases, and his regulatory expansions as governor, and he has not indicated that he would govern any differently as president

Between the candidates’ own words and the opinions from the Club for Growth, I don’t really see much I can add, except to remind the reader that anything involving taxes would have to get past Congress, which would probably not be difficult for Clinton, Obama, or Edwards, but would be a substantial difficulty for any Republican president not named Reagan.

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