Sunday, October 26, 2008

McCain/Obama - Fundamental Differences In Taxes

Another area where Senators McCain and Obama have a fundamental difference is in their views and policies on taxes. I would like to touch on those differences briefly.

We all have heard Obama wants to have a Robin Hood tax system - one in which he takes from the rich to give to the poor. Under Obama, the IRS would be done away with and replaced with Wealth Re-Distribution Centers. At these Centers, patriotic Americans (like Joe Biden) can have their income given away to those who don't even pay taxes!

Ok, I am just poking some fun at Senator Obama's plan. But seriously, Obama's plan is fundamentally flawed in that it will actually increase our federal deficit as we have to give tax "rebates" to those individuals who have not payed any income tax at all.

The Wall Street Journal called it a "welfare plan." The Heritage Foundation opined that the Obama tax plan would put America at tax levels equal to those in Europe. They write the following: "Senator Obama's new tax rate would give the United States one of the highest tax rates among developed countries. Currently only six of the top 30 industrial nations have a tax rate for all levels of government combined of over 55 percent. Under this tax plan, the United States would join this group and have a higher top rate than such high-tax nations as Sweden and Denmark...Historically, Senator Obama's tax rate would be the highest individual tax rate since the Jimmy Carter days." High corporate taxes are part of the Obama plan and that is not good for our country or American families.

Under the McCain tax plan, wealth and jobs are created by tax incentives for companies and blocking tax increases on individual earners. The Wall Street Journal stated the following on the McCain plan: "In stark contrast to Barack Obama, Mr. McCain believes that tax policy should be used to foster the creation of jobs and higher wages through economic growth, rather than to redistribute incomes. The economy is not a zero-sum game in which some people can enjoy higher incomes only if others are made worse off."

McCain is often criticized and his plan falsely accused of wanting to give tax credits to big oil companies. That is not true, but part of the McCain plan does offer tax credits to companies large and small. Low business taxes are very important for our economy. To overly simplify it, raise the taxes on companies and they have to pass that cost on to the consumer.

I've done some research on taxes and have written several posts on my blog about the subject of taxation. One key piece of research you will find is that higher taxes on business hurts business and consumers.

The Tax Foundation, a nonpartisan organization that monitors fiscal policy, issued a news release in August that showed American families bear the burden of high corporate taxes. They state, "Most people think corporate income taxes are paid by wealthy, anonymous companies...But as economists have been teaching for years, ultimately people bear the burden of corporate taxes, not companies. And in 2006 that burden averaged $3,190 per household. That's more than the average household spends on restaurant food, gasoline or home electricity in a year."

And an article by the Cato Institute also indicates taxing corporations does not help our economy. They say the following: "The U.S. corporate income tax rate is so high that cutting it would likely increase federal revenues because it would reduce tax avoidance while stimulating added investment...cutting the corporate tax rate by 10 percentage points or more could be a winner for both the economy and the government. "

Economic history teaches us that lower tax rates spur growth in the economy. Why? Because people have more income in their wallets. Additionally productivity and business success is not punished by higher taxes!

The McCain plan makes the most sense and is the best plan to spur economic growth.

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