Discussion:Election Tax Plans

I have seen comparisons of both Tax plans and one item, which could be significant is very cloudy. I have read from some internet posts that Obama plan would remove the exclusion on capital gains for home sales, primary residence. I cannot confirm this, although Obama's plan says that the capital gain rate will be raised. Obama's plan makes it clear that tax will be increased ONLY for those over 250,000. But wouldn't this include those that sell homes with over 250,000 capital gain..

Before you answer too quickly, one statement in the Obama plan says "Closing domestic tax loopholes: including clarifying the economic substance doctrine and increasing reporting of capital gains to close the tax gap".

Just wanting opinions on how the tax plans will affect, not on who will win or lose.

A very similar thing happened with Reagan and Bush I. Reagan ran up a huge deficit at the end of 8 years. You probably remember that Bush I said something like "read my lips, no new taxes." Then of course, reality took over, and Bush I had to push through a tax increase. Then it was the end of the days of cheap liquor and wine because of a new tax; he even got a luxury tax through (which didn't work). I can't remember what he did about the income tax.

I cannot imagine how either candidate is going to pay for the rescue of Fannie Mae and company, plus the many outstanding banks that will probably be bailed out....both candidates will duck and cover when these questions come, but don't worry, our press corp will not ask them.

Sorry Crow, increased tax rates don't reduce deficits...LOWER SPENDING does. Lower tax rates increase revenues (and that has been proven twice in both of the examples that you cite). Treasury revenues increased under both administrations.

Lower tax rates give people the incentive to do what they would not otherwise be willing to do...make capital investment and recognize capital gains.

Reagan and Bush 1 had the evil empire to deal with and were successful in doing so. But it took a lot of money. Why does one build a strong army? So they hopefully never have to use it.

Bush 2 has had to deal with 9-11 and the mortgage crisis.

And umemployment is still pretty low given what we've all been through. And the increases over the past few months has been the housing market (primarily).

http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=LNS14000000

It is impossible to have spending like a drunken sailor like we have had for the last 8 years, and expect that we can avoid a tax increase. But, we shall see. There are more ways to raise taxes than to merely raise the income tax.

I am not naive enough to trust either candiate with their tax cutting promises this time around. Keep in mind, Obama is in on the act too, promising to cut taxes on 95% of Americans. Bunch of soap salesmen.

Crow, "spending like drunken sailors" has gone on for far longer than the "past 8 years". that is a far-too-often used soundbite too.

I've moved it to Chat and notified Osutaxman about the move; obviously Osu or anybody can move it back if they disagree.

The favorite ploy seems to be for a Republican to run up a huge deficit, and then leave the Democrats with the mess. Then, the Dem's get blamed for "raising taxes". I agree that merely letting the sunsets activate in 2010 is not technically a tax increase, but the Republicans will certainly paint it as that.

Come to think of it, perhaps the best thing that could happen for the future of the Democratic party would be for McCain to win.

Don't forget that one of the most beloved Democrats of all time, JFK, cut taxes and used and Irish politician's declaration that a "rising tide lifts all boats." He also sent more "advisers" to a place called Vietnam that Johnson later escalated, which cost Johnson politically. Of course, Nixon didn't help either.

Both parties are not immune is my point.

Obama's tax plan includes the following:

Simplify Tax Filings for Middle Class Americans: Obama will dramatically simplify tax filings so that millions of Americans will be able to do their taxes in less than five minutes. Obama will ensure that the IRS uses the information it already gets from banks and employers to give taxpayers the option of pre-filled tax forms to verify, sign and return. Experts estimate that the Obama proposal will save Americans up to 200 million total hours of work and aggravation and up to $2 billion in tax preparer fees.

Here is the link: http://www.barackobama.com/issues/economy/#tax-relief

The source is verbatim from Obama's website. Now, it seems to me that using Obama's rationale, if he gets elected and this is passed, he is taking business from us tax preparers, but not only that, government is filling out tax forms for people? Isn't that big government? How are these people going to know if it's correct or not? This is an extremely implausible idea to me. I realize it's only an option, but I am dead set against an idea like this from any party.

FYI, I am a Democrat. But, I am extremely non-partisan. I vote for whom I want. Heck, I might vote for Ralph Nader for all I know I am so disgusted.

Most of the people who would be targeted by a proposal like this would be poor to middle-class Americans. Many of these people are not very well versed in tax laws and could use a professional in some situations. To suggest the government take over that role is, in my opinion, un-American. It reeks of socialism, not capitalism.

FYI, I am no fan of McCain either.

Roy points out nicely that presidents don't increase or decrease taxes. My biggest fear is that one party will control the White House and both houses of Congress virtually guaranteeing tax increases and a government run amok. After looking an electoral college map yesterday, I pretty much know who it's going to be, unless something really drastic happens in the next two months.

Tom

You realize, of course, this ISO/AMT problem was built into the law in 1987 when TRA 86 was drafted and passed by 'reformers' who could not see far enough ahead. Before we blame the lawmakers and the executive branch, do remember most of these elected poobahs have staffs, and I suspect half do not know what their staff is doing.

The real issue is growth. Clinton had some very good years, but it was not due to what he did ... the economy had a great tech cycle. Let's move away from the Macro in which we all have opinions ... to the individual tax payer level. What concerns me about Obama's Tax policy is the lack of understanding that not all taxable income is equal. He refers to anyone making $250,000 as rich and could pay more taxes. I believe this is true for lawyers, CPA's, doctors, C-corp exec's and others whose income represents disposable income. But how about your small businessmen (& women) who may make $250,000 if section 170 is removed? Are they rich if they buy a new peice of capital equipment? Any of you have clients that are owner/operator truckers with a small fleet of 3-4 units? What does a another 18 wheeler cost that would create another job? $150 -$200K. Higher taxes means borrowing more money for them. The same holds true for anyone that has to increase inventory. You all do taxes, what impact will the sunset have on your small businessman's investment in real capital goods?

My career was in a large company involved from time to time with small projects in the $10 million range. We would do interal rates of return(IRR). Often, the discounted cash flow would be heavily influenced by investment credits and tax rates. If the IRR did not exceed the hurdle rate ... no project = no new jobs.

I am still interested on the impact on your clients?

In doing interview returns since 1982 (very small businesses before that) I have found that the people who are successful and who make money do so no matter the taxes, while the others holler 'deal.' The smart ones today are liquidating corporations, not necessarily because Obama will raise taxes but the long term trajectory says there is so much new government debt to be created and paid for.....like Fannie & Freddie.

Prior to 1987, when rates were 50% [higher on unearned income pre-81] those who could afford it took options and deferrals or if they had too much money, bought into 'shelters.' I had several clients who salaries quadrupled or better once rates fell to 28%....then post 1993 and 39% max rates, stock options came into play again, though this time more democratized.

http://www.chicagotribune.com/news/chi-ap-ia-irschallenge,0,1372929.story

do with the predicted surplus of the next 10 years, I wonder what happened to that line of thought?

I thought Perot was a nut, but I think the little runt might have been right about this free trade swindle. I took quite a bit of Economic History in college, more than I ever wanted to know of it, and we were preached the benefits of free trade.

But generally, what I have seen is that free trade reduces the equation to the lowest common denominator...the so-called race to the bottom. Particularly in wages (if you are pro family, it stands to reason a family lives/survives better on good wages, non?)

Any business broker will tell you that the best price for a business can be obtained from a light manufacturing concern. Yet, we were told here we didn't need manufacturing, let the Chinese do that.

The manufacturing domestic production reproduction credit has got my alterations lady, and my sandwich guy classified as manufacturers; fiddlesticks: that should tell you something about what's wrong with our country.

The thing about this free trade giveway was that it was a 100% bi-partisan effort. Clinton and Gingrich worked together on that. We were sold down the river.

Now, they will argue: you can get really cheap stuff at Walmart, and this makes your life better. The theory being that they pass on the savings. The truth is that they pass on a small part of the savings, and put the rest in their pocket. But the real kicker is that the worker is essentially forced to be a Walmart shoppper because he does not have the money anymore to shop at a Federated store (or a federated store before it was federated) By God, what happened to Sears? It was Walmarted. And, this is progress.

Hell, the man that works at Walmart can't even afford to shop there.

I support Unions. Pay someone well, and he or she can go and spend that money. Every man a king. But, I am quite cognizant of the fact that Huey Long was shot...I'll probably have the same thing happen to me.

Tom

You'll find a lot more if you Google; perhaps views have changed over time but way back when I went to all the economic classes like Macro and Micro and others, no one had a good word to say about it.

I did not remember Smoot Hawley at all, but after reading about it, I think there was a worldwide constriction of free trade prior to the depression, and it certainly contributed to the depression, at least according to the economists. Good point.

The central problem is that capital (money) can move very quickly and freely, at the touch of a button, say to open a new plant in China. BUT workers cannot move so easily to take advantage of higher wages in another country. So, big business can essentially trap labor, and they have a captive labor market to exploit. This pushes wages down for all in the long run; so we have more goods, but there is less money to buy those goods. Walmart is the case study in this. We have traded away quality for quantity, and a lower standard of living for all. Those able to extract the wage differential are getting filthy rich, and the distribution of wealth statistics show this.

LOL. Tom, you gotta give the guy credit for one thing, he didn't mamby pamby around with his calculations. You know, the Mayans predict 2012 as the end of this era. I don't know if they pinned it down to a day and time though.

But glad the world's still here.

Regarding the discussion on unions ... I still remember what my old Labor Economics professor said 40+ years ago: "Companies that have unions have earned them." Companies that treat their employes poorly have unions and deserve them. Unfortunately, the union can do nothing about bad management that ultimately is the reason for the loss of jobs. However, technology will also reduce the numbers of jobs ... which have been by far the case in manufacturing. There is a lot of light manufacturing but it employs less. Last year I was in an Amish community, on my morning run I stopped at a custom routing factory. I expected to see a bunch of Amish doing handwork. The young Amish guy who ran the place had 6 CNC routers doing the work. He joked about Amish craftsmanship.

"and two parents and one staying at home" and now we have many single-parent homes or dual-income earning households. Bottom line is kids have less time to spend with their parents. It seems the cost of being middle class has gone up significantly.