How much does Barack Obama want to raise taxes? This provides a guide:
When it comes to taxes, the difference between Barack Obama and John McCain is arguably as wide as it’s been in a presidential race since Ronald Reagan and Walter Mondale battled in 1984. Sen. Obama is proposing to raise taxes more than any recent candidate, while Sen. McCain wants to cut them substantially. Most of the campaign debate has been over whose taxes would be raised, and whose cut.
Mr. Obama would roll back the 2001 and 2003 tax cuts for taxpayers in the top two brackets, raising the top two marginal rates of income tax to 36% and 39.6% from 33% and 35%. The 33% rate begins to hit this year at incomes of $164,550 for an individual and $200,300 for joint filers. Mr. Obama claims no “working families” earning less than $250,000 would pay more in taxes, but that’s because he defines income more broadly than the taxable income line on the IRS form. If you’re an individual with taxable income of $164,550, you will pay more taxes.
The Democrat would also reinstate the phaseout of the personal exemptions and itemized deductions for married couples making more than $250,000 a year. Those phaseouts would raise the top marginal tax rate for millions of taxpayers by another 1.5 percentage points.
Capital gains and dividend taxes would increase to 20% from 15% for those making more than $250,000, although capital-gains taxes on investments in “start-ups” would be eliminated.
Mr. Obama’s most dramatic departure from current tax policy is his promise to lift the cap on income on which the Social Security payroll tax is applied. Currently, the employer and employee each pay 6.2% up to $102,000, a level that is raised for inflation each year. The Obama campaign says he’d raise the payroll tax rate on incomes above $250,000 by as much as two to four percentage points — though it’s unclear if that higher rate would apply to the employee, the employer, or both.
What does it all add up to?
Taken together, these add up to about a 10-percentage-point hike in marginal tax rates for those making more than $250,000 a year, including millions of small businesses that pay taxes at individual rates. The “marginal” rate refers to the rate paid on the next dollar of income, and it has an especially strong influence on decisions to work and invest.
This ignores hints of more tax hikes to come, which Charlie Rangel and Barney Frank have suggested. And it assumes that Obama won’t look at his $4.3 trillion in new spending plans and conclude he needs to go further down the income ladder to scrape for more revenue.
When you go step by step, it strikes you how substantial the tax hikes may be. It seems incomprehensible that, in the midst of a worsening recession, Obama would still be advocating what amounts to throwing the economic car into reverse. What’s the point of all that Fed-created liquidity if you are going to suck millions and millions of dollars back out of the private sector? But that’s what Obama says he wants to do: raise taxes – lots and lots.