Obama's MisLeading Tax 'Plan'

The junior Senator from Illinois had his economic policy advisors stumping the cable news channels and writing in the Wall Street Journal last week to spread the word about his tax 'plan.'

Suddenly, the rookie's economics guys have him sounding positively magnanimous. According to them, gone is the specter of the big, bad tax-and-spend Obama.

I guess it's just ....borrow????....and spend now.

Seriously, the point that Austin Goolsbee, Obama's discredited economics counsel from U of Chicago, made recurringly is that his boss wants to lower the capital gains rates to 20%. That's what they trumpet far and wide.

What gets less attention is that the freshman Senator, who has no private sector experience whatsoever, and a short public one, at that, wants to tax the hell out of everyone considered middle class.

That's $200,000 AGI for single filers, and $250,000 for couples.

As I wrote last November, in this post, Alan Reynolds has demolished the notion that these income levels constitute 'wealthy' individuals. I wrote in that post,

"In his editorial, Reynolds demolishes the evolving Democratic claim that our country's income distribution is 'the most unequal that it's ever been.'

He begins with this passage,

"The argument for these proposals has nothing to do with the impact of higher tax rates on incentives and the economy. It is all about "fairness" -- defined as reducing the top 1%'s share of income. This political exercise invariably begins by citing dubious statistics about pretax incomes among the top 1% (1.3 million tax returns) as an excuse for raising tax rates on the top 5%, among others.

Echoing speeches from Sen. Clinton, Business Week recently exclaimed, "According to new Internal Revenue Service data announced last week, income inequality in the U.S. is at its worst since the 1920s (before the Great Depression). The top percentile of wealthy Americans earned 21.2% of all income in 2005, up from 19% in 2004."

These statistics are extremely misleading.

First of all, the figures do not describe the top percentile's share of "all income," but that group's share of "adjusted" gross income (AGI) reported on individual tax returns. For one thing, thousands of professionals and business owners who used to report most of their income under the corporate tax responded to lower individual income-tax rates after 1986 and 2003 by reporting more income under the individual tax as partnerships, LLCs and Sub-S corporations."

This is critically important. So much so that President Bush commented on it extensively in his speech when he visited Lancaster, Pennsylvania a few months ago. Nobody commented on this aspect of his talk, nor his command of this particularly important nuance of the tax code."

Of course, Democrats of all stripes routinely ignore this reality. They love to quote non-comparable, vague statistics relating to taxes, incomes and percentage of taxpayers.

But the reality is that many 1040 filers today are, in actuality, running businesses. They aren't just wealthy individuals. They are often risk-taking small business people who are forced into LLCs due to our government's confiscatory policies regarding small business organization.

So Obama's plan is actually 'tax and spend.' Just like it's always been.

Sure, he and his minions want you to watch the "little birdie over here," low capital gains rates.

But the Sunday punch is in the elevated rates he'll demand on 'rich' families who try to make do for several children on $250,000. As those who attempt this feat know, it's tough to replicate your own educational track for your children on that kind of family income, let alone with the Black Adder deciding you are too wealthy, and he's going to kindly redistribute some of your 'wealth' to folks poorer than, and probably working no harder than, you.

You probably thought a good education and hard work entitled you to earn more and keep it. Not in Obama's America, my friend.

Isn't that generous of the Democratic Party's putative Presidential nominee?