Tags: obama | tax | plan

Economists: Obama Will Hurt Middle Class

By    |   Thursday, 30 Oct 2008 11:30 AM

Barack Obama's tax plan would mean that half of all Americans would pay no income tax at all.

Of course, 66 percent of taxpayers paid just 8 percent of taxes in 2006, so the change is not drastic.

Yet funding the programs Obama wants to put in place could easily drive him to institute a value-added tax like most Western European countries have, warn two economists.

Known as a VAT tax, it’s just a sales tax, which hits everyone who buys anything equally, regardless of income.

"(A VAT) would actually tax the middle class even more than if marginal income taxes were raised," First Trust economists Brian Wesbury and Robert Stein write in Forbes.

In fact, many of Obama's proposals are just spending programs dressed up as tax cuts, according to Wesbury and Stein.

The only difference is that checks would be sent by the IRS instead of another government agency.

"This (plan) is a modern-day version of the negative income tax, and it would make the burden of taxes fall even more heavily on those with higher incomes," the economists wrote.

In 2005, they note, the wealthiest 40 percent of households earned 74 percent of income and paid 99 percent of income taxes.

As for “Joe the Plumber,” taxes would rise on about 10 percent of small businesses, according to the National Federation of Independent Business.

"When you dig down into those numbers, you have to ask not how many, but who," Bill Rys, the federation's tax policy counsel, told the Kansas City Star.

The companies most at risk have between 20 and 250 workers, according to Rys, simply because they tend to earn in excess of the $250,000 limit Obama is targeting.

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Barack Obama's tax plan would mean that half of all Americans would pay no income tax at all. Of course, 66 percent of taxpayers paid just 8 percent of taxes in 2006, so the change is not drastic.Yet funding the programs Obama wants to put in place could easily drive him to...
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