Thursday, November 06, 2008

obamessiah's tax increases

Get ready for big tax increases if you are even moderately successful in the US( some of obamessiah's allies think $120000/ year makes you rich). This should slow growth. Companies and big income earners may actually start moving capital.

Under his income tax plan, Mr. Obama says he will provide tax cuts for 95% of Americans. He will do this by repealing Bush tax cuts -- set to expire in 2010 -- and bumping the top rates back to 36% from 33% and to 39.6% from 35%. Individuals earning over US$200,000 and families over US$250,000 will see sizable tax increases. This includes sole proprietors of businesses such as lawyers, accountants or plumbers called Joe.

Since 38% of Americans currently do not pay federal income taxes, Mr. Obama will provide them with refundable tax credits. Under his plan, 48% of Americans will pay no income tax.

"For the people that don't pay taxes, he is simply going to write them a cheque," says Andy Busch, global foreign exchange strategist at BMO Capital Markets. "That is income redistribution at its worst and produces very little value."

Other plans include raising taxes on capital gains and dividends to 20% from 15% for families earning more than US$250,000. He plans to leave the corporate tax rate at 35%, which in a world of rapidly falling rates, looks positively anti-business. He will introduce windfall taxes on oil and gas companies but offer US$4-billion in credits to U. S. auto-makers to retool to greener cars.

Much has been made of Mr. Obama's plan to renegotiate NAFTA to make it more labour-friendly, though no one seems to believe he will actually make it more protectionist.

The bottom line is this: Obama's economic plan is likely to be a drag on growth and it will cost money. The nonpartisan Tax Policy Center estimates Obama's program would add US$3.5-trillion to U. S. debt over the next 10 years, including interest. His plans for health care-- which may be delayed by financial necessity -- would tack on another US$1.6-trillion.



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