Friday, November 28, 2008

Shifting the Tax Burden

A recent discussion with a friend regarding President-elect Obama's proposed economic policy has left me scratching my head in disbelief.

It is my contention that Mr. Obama's policy is socialist. Socialism is the vesting of ownership and control of capital (or property, means of production, etc.) in the community as a whole. Mr. Obama has stated, on more than one occasion, that he wants to spread the wealth around (and place a windfall profits tax on the oil companies, or any other business that makes too much money for his liking). He would do this by using the tax code to place an even higher burden on higher-income earners, while relieving more lower- and middle-income earners of any income tax liability. This is not news to anyone, it is Mr. Obama's campaign platform. Accusing someone of using circular reasoning regarding this issue (Obama is a socialist because he wants to redistribute wealth; Obama wants to redistribute wealth because he is a socialist) is misguided and intellectually dishonest.

To say that everyone who earns an income pays federal tax, at least in the form of Social Security and Medicaid, regardless of income level, is a fallacy. There are these funny little things called the Earned Income Tax Credit, and the Child Care Credit. These two refundable "tax" credits actually pay lower-income earners above what is deducted from their income for all federal tax. That is what they were designed to do. At the Urban Institute:

The Earned Income Tax Credit (EITC) is the largest cash transfer program for low-income parents in the United States.1 The refundable tax credit supplements wages and offsets taxes paid by low-income workers.


The EITC program was implemented in 1975 to help offset the Social Security payroll taxes paid by low-income working parents and to encourage parents to work. Over the past 25 years, the EITC has grown dramatically through a large increase in benefits and expanded eligibility.

These credits pay individuals with children (up to two) more than what a single person would receive. The children involved do not even have to be related to the individual in order to receive the credit. These credits are abused in low-income neighborhoods. I have known, first-hand, of people selling the SSNs of their third, or fourth, child to people without children so that the buyer can claim the EITC and CCC illegally.

Obama will raise taxes on those who work hard, achieve more, and try to save some of their earnings. Obama will shift more of the tax burden to the high-income end, thereby relieving more on the low-income end of any tax liability whatsoever.

While we are on the subject of socialism, Mr. Obama sponsored S. 2433, known as the Global Poverty Act, in May 2008. It would require "the president to develop and implement a comprehensive policy to cut extreme global poverty in half by 2015 through aid, trade debt relief, and coordination with the international community, businesses, and NGOs." This would cost the U.S. nearly $845 billion in addition to what we already spend on foreign aid.

These are things Mr. Obama said he will do as president. If his plans are not socialist, I do not know what is.

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