Obama on Taxes

Obama on Taxes

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obama state of unionPresident Obama gave his first State of the Union address tonight. Here are the parts of the speech in which he addressed tax policy followed by my humble observations.

(Read the entire speech)

1.  The Bank Tax

  • What the President said (emphasis added):

To recover the rest [of the TARP funds], I have proposed a fee on the biggest banks. I know Wall Street isn’t keen on this idea, but if these firms can afford to hand out big bonuses again, they can afford a modest fee to pay back the taxpayers who rescued them in their time of need.

  • Setting the record straight:

This isn’t a fee, it’s a tax. But calling it a tax runs the risk of losing popular support, so the President, being first and foremost a politician, opts for the euphemism.

2.  Tax Cuts/Increases

  • What the President said (emphasis added):

Let me repeat: we cut taxes. We cut taxes for 95% of working families. We cut taxes for small businesses. We cut taxes for first-time homebuyers. We cut taxes for parents trying to care for their children. We cut taxes for 8 million Americans paying for college. As a result, millions of Americans had more to spend on gas, and food, and other necessities, all of which helped businesses keep more workers. And we haven’t raised income taxes by a single dime on a single person. Not a single dime.

  • Setting the record straight:

Not for lack of trying. Mr. Obama and the Democrats have proposed a few dozen new tax measures, including income tax hikes, many of which can be found in both the Senate and House versions of the Healthcare bill. Here’s a list of just some of the tax increases proposed by the President and, as my friend Joe Kristan would say, his Congresscritter friends.

So while it may be technically true that Obama has not raised income taxes by a single dime, a pile of tax hikes on the “rich” and backdoor taxes on middle-class consumers have been at the top of his agenda since he took office. Make no mistake about it, income tax increases are coming.

3.  Capital Gains Taxes/Small Business Tax Breaks

  • What the President said (emphasis added):

I am also proposing a new small business tax credit – one that will go to over one million small businesses who hire new workers or raise wages. While we’re at it, let’s also eliminate all capital gains taxes on small business investment; and provide a tax incentive for all businesses, large and small, to invest in new plants and equipment.

  • Setting the record straight:

I agree with this proposal, but am a bit surprised that the President wants to completely eliminate capital gains taxes on small business investments. I had thought the President supported an across-the-board increase in capital gains rates.

Perhaps the President has finally come to realize what some of us have known all along. If you reduce the cost of investment in capital by reducing taxes, you increase investment in capital. And increased investment in capital means more jobs.

4.  Tax Incentives for Corporations to Stop Sending Jobs Overseas

  • What the President said (emphasis added):

And to encourage these and other businesses to stay within our borders, it’s time to finally slash the tax breaks for companies that ship our jobs overseas and give those tax breaks to companies that create jobs in the United States of America.

  • Setting the record straight:

This is what conservatives have been saying all along. Reduce the tax burden of the job creators and they’ll be less likely to move their operations overseas. Some, like me, have gone as far as to suggest that we should eliminate the corporate tax altogether.

5.  Education Credit

  • What the President said (emphasis added):

To make college more affordable, this bill will finally end the unwarranted taxpayer-subsidies that go to banks for student loans. Instead, let’s take that money and give families a $10,000 tax credit for four years of college and increase Pell Grants. And let’s tell another one million students that when they graduate, they will be required to pay only ten percent of their income on student loans, and all of their debt will be forgiven after twenty years – and forgiven after ten years if they choose a career in public service. Because in the United States of America, no one should go broke because they chose to go to college.

  • Setting the record straight:

Could this be the slippery slope to government funded college educations for all Americans? In any case, it sounds like an expensive proposition, and one that I think will diminish the value of undergraduate degrees. College is only as good as the effort the student puts into it, and I can envision parents enrolling their apathetic kids in school just to get the tax credit.

Tax credits are always potentially very dangerous because they invite abuse.

6.  Middle-Class Tax Cuts and Taxing the Rich

  • What the President said (emphasis added):

To help working families, we will extend our middle-class tax cuts. But at a time of record deficits, we will not continue tax cuts for oil companies, investment fund managers, and those making over $250,000 a year. We just can’t afford it.

  • Setting the record straight:

Very clever. The President carefully avoids touching the third rail by admitting that he’ll raise income taxes on the so-called rich. Instead, he merely says he will not “extend” the tax cuts. What he means here is that he will allow the Bush tax cuts to expire, which, in fact, means a significant tax increase to millions of moderately successful Americans.

Again, the President, while pretending to be a straight-talker, is parsing his words to avoid a politically unpalatable truth. He wants desparately to increase taxes.

Related Posts:

The Bank Tax:

Taxing the Rich:

About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida

Comments

  1. AspiringCPA says:

    Comments by item #:
    1) This “fee” will be passed on as a “fee” to the consumer. The easiest way to put a fee on bank customers is to hit the ones that owe…this is a tax on the poor and middle class. Since when does the government get to scruitinize compensation anyway?

    2) He advocated Cap&Tax almost in the same breath. This is the biggest tax increase on the middle class and poor EVER.

    3) I will believe it when I see it. He still wants to raise the margin rate for individuals, which would include small business flowthroughs.

    4) Bush already did this with the DPAD. I am willing to bet that the slash will be less than the hike.

    5) …Where do I start? Why should I fund someone else’s kid through college. I am still funding myself. College is a luxury for those who work hard, not an entitlement.

    6) The big companies will just pass these taxes to the consumer. Another Liberal tax on the poor and middle class. Making the poor pay taxes would be wildly unpopular. However, sneaking up behind him at the gas pump and stealing his wallet seems to be acceptible.

    My favorite part of the speech was when he talked about “creating jobs” through clean energy creation. What he really meant was “I want to reallocate your money to someone else in the most popular way possible.” Solar panels are not a hot item. He knows it. So he then said we would create “incentive.” Bring on the tax for subsidies to sell solar garbage to people who paid to have them made!

  2. AspiringCPA,

    My favorite part of the speech was watching Biden try to act solemn while the President spoke.

  3. AspiringCPA says:

    Or when Pelosi starts the standing ovation with a very stern look out at the crowd.