Senator Obama's plan for taxes during the campaign consisted of both generic and specific pledges. Along with lowering the overall tax rate for 95% of Americans, President Obama promised special breaks for home ownership and for seniors.
Reduce taxes for 95% of Americans by roughly $1000
No one making less than $250,000 would see a tax raise
create a universal home owners tax credit
eliminate all income taxes for senior making under $50,000 per year
simplify the tax code and create a system to allow many Americans to do their taxes in less than 5 minutes
$500 tax credit ($1,000 a couple) to "make work pay"
$4,000 tax credit for college tuition.
10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).
a "savings" tax credit of 50% up to $1,000.
expand the earned-income tax credit to allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.
child care credit of 50% up to $6,000 of expenses a year.
a "clean car" tax credit of up to $7,000 on the purchase of certain vehicles
Fiscal Responsibility
Increase revenue through cracking down on tax havens
With the exception of the "clean car" tax credit, the remaining items are refundable, which means that even those who pay no taxes at all would receive the additional money from the government. To increase the revenue taken in by the federal government, Senator Obama proposed the following tax increases in the 2010 budget:
Raising the top two income tax brackets from 33 percent to 36 percent, and from 35 percent 39.6 percent;
Raising capital gains and dividends tax rates from 15 percent to 20 percent;
Phasing out personal exemptions and limiting itemized deductions;
Reducing the value of tax deductions by approximately one-fourth
During the 2008 election cycle, Senator Obama repeatedly referred to taxes as a mechanism to institute "fairness." During one of the primary debates with Senator Clinton, Senator Obama argued that raising the rates on capital gains taxes and other items was necessary to increase revenue, the moderator responded that the exact opposite pattern is a documented phenomenon. Senator Obama then responded that this may be true, but raising the rates was still necessary to ensure fairness.
Of Senator Obama's many tax pledges, the promise to lower taxes for 95% of all Americans has been the mostly widely scrutinized. Numerous programs and taxes which have been enacted since that time have seemed to counter this promise.
The SCHIP program was re-authorized in Congress and signed into law by President Obama in 2009. The law funded the program through massive increases in the taxes on Tobacco, prompting some to say this violated the President's pledge not to raise taxes on the middle class.
During the 2008 campaign, Senator Obama claimed that Senator McCain could not mirror his pledge to reduce taxes for 95% of Americans because Senator McCain was proposing a tax on cadillac health care plans. The 2009-2010 health care reform legislation contained such a tax. This means that according to President Obama's own words, he broke the pledge.
In an interview with George Stephanopolous, President Obama denied that the fee for not purchasing health insurance was a tax. When Mr. Stephanopolous read the definition of a tax in comparison to the mandate, President Obama stated that he was "reaching."
The subject of tax havens was one that Senator Obama spoke about often. In his blueprint for fiscal discipline, he noted that he would crack down on offshore havens and generate a great deal of added revenue. In May of 2009, President Obama announced his plan for tax havens. The highlights of this plan (which is detailed in the write-up) are:
Replacing Tax Advantages for Creating Jobs Overseas With Incentives to Create Them at Home
Closing Foreign Tax Credit Loopholes
Hire Nearly 800 New IRS Staff to Increase International Enforcement:
During the 2008 campaign, Senator Obama stated that he would repeal the Bush tax cuts for those making less than $250,000 and hold the estate tax at 2009 levels to pay for his health care reforms. He also stated that the Bush tax cuts were intentionally made temporary so that their effects on the deficit would not show. He then supported an extension of all Bush tax cuts with the exception of those for people making over $250,000 (the portion pinned with paying for health care). In 2010, President Obama argued that the Republicans were holding those tax cuts for the middle class "hostage" by insisting that the cuts for those making more than $250,000 be continued as well.
In many speeches during the 2008 election cycle and in all the general election debates, Senator Obama repeatedly stated that he opposed spending freezes. He asserted numerous times that such a measure was akin to using a hatchet where only a scalpel is necessary. In January of 2010, President Obama announced a 3 year spending freeze on all discretionary spending.
Tax Pledges
Speaking at a campaign event in June of 2008, Senator Obama made a number of pledges concerning tax rates. He stated that he would create a universal home owners tax credit, which would allow those who don't itemize to reduction for mortgage interest. He stated that he would eliminate all income taxes for senior making under $50,000 per year. He also pledged to simplify the tax code and create a system to allow many Americans to do their taxes in less than 5 minutes. He stated that the government would send you a form with an estimate of how much it owes you and you could dispute it if you like, or accept it and be done with your taxes.
At a debate during the general election, Senator Obama made a promise that he repeated often during the campaign which was that he would reduce taxes for 95% of Americans.
SCHIP Re-Authorization
The State Children's Health Insurance Program (SCHIP) is a program that provides health care for children and is funded through both state and federal policies. The 2009 re-authorization of the program funded it by greatly increasing taxes on tobacco products. Taxes were increased on all forms of tobacco from cigars to cigarettes to pipe tobacco. Below is the section of the bill that describes these tax increases.
SEC. 701. INCREASE IN EXCISE TAX RATE ON TOBACCO PRODUCTS.
(a) CIGARS.—Section 5701(a) of the Internal Revenue Code of 1986 is amended—
(1) by striking ‘‘$1.828 cents per thousand ($1.594 cents per thousand on cigars removed during 2000 or 2001)’’ in paragraph (1) and inserting ‘‘$50.33 per thousand’’,
(2) by striking ‘‘20.719 percent (18.063 percent on cigars removed during 2000 or 2001)’’ in paragraph (2) and inserting ‘‘52.75 percent’’, and
(3) by striking ‘‘$48.75 per thousand ($42.50 per thousand on cigars removed during 2000 or 2001)’’ in paragraph (2) and inserting ‘‘40.26 cents per cigar’’.
(b) CIGARETTES.—Section 5701(b) of such Code is amended—
(1) by striking ‘‘$19.50 per thousand ($17 per thousand on cigarettes removed during 2000 or 2001)’’ in paragraph (1) and inserting ‘‘$50.33 per thousand’’, and (2) by striking ‘‘$40.95 per thousand ($35.70 per thousand on cigarettes removed during 2000 or 2001)’’ in paragraph
(2) and inserting ‘‘$105.69 per thousand’’.
(c) CIGARETTE PAPERS.—Section 5701(c) of such Code is amended by striking ‘‘1.22 cents (1.06 cents on cigarette papers removed during 2000 or 2001)’’ and inserting ‘‘3.15 cents’’.
(d) CIGARETTE TUBES.—Section 5701(d) of such Code is amended by striking ‘‘2.44 cents (2.13 cents on cigarette tubes removed during 2000 or 2001)’’ and inserting ‘‘6.30 cents’’.
(e) SMOKELESS TOBACCO.—Section 5701(e) of such Code is amended—
(1) by striking ‘‘58.5 cents (51 cents on snuff removed during 2000 or 2001)’’ in paragraph (1) and inserting ‘‘$1.51’’, and (2) by striking ‘‘19.5 cents (17 cents on chewing tobacco removed during 2000 or 2001)’’ in paragraph (2) and inserting ‘‘50.33 cents’’
(f) PIPE TOBACCO.—Section 5701(f) of such Code is amended by striking ‘‘$1.0969 cents (95.67 cents on pipe tobacco removed during 2000 or 2001)’’ and inserting ‘‘$2.8311 cents’’.
(g) ROLL-YOUR-OWN TOBACCO.—Section 5701(g) of such Code is amended by striking ‘‘$1.0969 cents (95.67 cents on roll-yourown tobacco removed during 2000 or 2001)’’ and inserting ‘‘$24.78’’.
Wall Street Journal Analysis of Plan
An analysis of Senator Obama's tax proposals by the Wall Street Journal discussed 7 tax credits in Senator Obama's plan. The difference that the article points out between these tax credits and normal tax cuts is that these are refundable tax credits, which allows the recipient to receive a check if their tax obligation is less than the refundable amount. This means that people could actually receive a net profit from the government at the end of the year.
- A $500 tax credit ($1,000 a couple) to "make work pay" that phases out at income of $75,000 for individuals and $150,000 per couple.
- A $4,000 tax credit for college tuition.
- A 10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).
- A "savings" tax credit of 50% up to $1,000.
- An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.
- A child care credit of 50% up to $6,000 of expenses a year.
- A "clean car" tax credit of up to $7,000 on the purchase of certain vehicles.
Here's the political catch. All but the clean car credit would be "refundable," which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer -- a federal check -- from taxpayers to nontaxpayers. Once upon a time we called this "welfare," or in George McGovern's 1972 campaign a "Demogrant." Mr. Obama's genius is to call it a tax cut.
The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation's Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.
The total annual expenditures on refundable "tax credits" would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center. This means that the tax-credit welfare state would soon cost four times actual cash welfare. By redefining such income payments as "tax credits," the Obama campaign also redefines them away as a tax share of GDP. Presto, the federal tax burden looks much smaller than it really is.
Blueprint for Fiscal Discipline
In his blueprint for fiscal discipline, Senator Obama outline his plans for balancing the budget and eliminating waste. Part of that plan was to end tax haven abuses.
Cut down on tax haven and tax shelter abuse
Go after $100 Billion in lost tax revenue
Shut down offshore tax havens and corporate loop holes
Tax reform that works for American families
Middle class tax cut
$1,000 of relief to 95% of workers and their families
Eliminate income taxes for retirees making less than $50,000
Never privatize social security
We lose $100 Billion dollars a year because corporations get to set up mailboxes offshore so that they can avoid paying a dime in taxes in America. Imagine if you got to do that. You could just open up a mailbox in the Cayman Islands somewhere. There's a building right now in the Cayman islands that is the address for 18,000 corporations. Now that's either the biggest building in the world, or it's the biggest scam in the world and I think we know which one it is. So we're gonna shut down those offshore tax havens and all those corporate loopholes. You shouldn't have to pay higher taxes because some corporation cut corners to avoid paying theirs.
I will reform our tax code so that it is simple, fair, and advances opportunity instead of distorting the market by advancing the agenda of some lobbyist or oil company. And i'll use the money to help pay for a middle class tax cut that will provide $1000 dollars of relief. $1000 of relief to 95% of workers and their families. I'll make oil companies like Exxon pay a tax on their windfall profits and we'll use the money to help families pay for their skyrocketing energy costs and other bills.
We'll also eliminate income taxes for any retiree making less than $50,000 per year. Because every senior deserves to live out their life in dignity and respect. And while John McCain wants to pick up where George Bush left off by trying again to privatize social security, I will never waiver in my commitment to protect that basic promise as President. We will not privatize social security and we will not raise the retirement age. We will protect social security for future generations by asking the wealthiest Americans to pay their share.
Blueprint for Economy
In his campaign blueprint for the economy, Senator Obama promised not to raise taxes on the "middle class".
Providing middle class Americans tax relief
Making under $250,000
No tax increase
Cut your taxes
3 times more middle class tax relief than opponent
If you make $250,000 dollars a year or less, we will not raise your taxes. We will cut your taxes. In fact, my provides 3 times as much tax relief to middle class families than John McCain does. So I'm happy to have a debate about taxes with John McCain.
ABC News Primary Debate
As part of the ABC News primary debate, Senator Obama was asked about his plan to raise the capital gains taxes. The moderator points out that the amount of revenue generated from the taxes increases when the rate is lowered and Senator Obama points out that he is more interested in fairness.
Moderator: You have however said that you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC and I quote " I certainly would not go above what existed under Bill Clinton which was 28%." It is now at 15%, that's almost a doubling if you went to 28%. But actually, Bill Clinton signed legislation that dropped the capital gains tax to 20%, and George Bush has taken it down to 15%, and in each instance when the rate dropped, revenues from the tax increased. The government took in more money. And in the 1980's, when the tax was increased to 28%, the revenues went down. So why raise it at all? Especially given the fact that 100 million people in this country own stock and would be affected .
Obama: Well Charlie what I said was that I would look at raising the capital gains tax for purposes of fairness. We saw an article today which showed that the top 50 hedge fund managers made 29 billion dollars last year. 29 Billion dollars for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That's not fair. And what I want is not oppressive taxation. I want businesses to thrive and I want people to be rewarded for their success, but what I also want to make sure is that our tax system is fair, and that we are able to finance health care for Americans that don't have it, and that we are able to invest in our infrastructure and invest in our schools and you can't do that for free and you can't take out a credit card from the bank of China in the name of our children and grandchildren and then say that you're cutting taxes which is essentially what John McCain has been talking about and that is irresponsible. I believe in the principle in you pay as you go. You don't propose tax cuts unless you are closing tax breaks for other individuals, and you don't increase spending unless you're eliminating spending or you're finding some new revenue. ...
Moderator: But history shows that when you drop the capital gains tax, the revenues go up.
Obama: That might happen or it might not. It depends on what's happening on Wall Street and how business is going. I think that the biggest problem that we got on wall street right now is the fact that we got a housing crisis that this president has not been attentive to and it John McCain three tries before he got it right.
Crack Down on Tax Havens
In May of 2009, President Obama enacted a plan to crack down on overseas tax havens that he stated were being used by businesses to avoid paying their fair share of taxes. The full text of the plan can be read here.
1. Replacing Tax Advantages for Creating Jobs Overseas With Incentives to Create Them at Home:
The Administration would raise $103.1 billion by removing tax advantages for investing overseas, and would use a portion of those resources to make permanent a tax credit for investment in research and innovation within the United States.
Reforming Deferral Rules to Curb A Tax Advantage for Investing and Reinvesting Overseas
Closing Foreign Tax Credit Loopholes: Current law allows U.S. businesses that pay foreign taxes on overseas profits to claim a credit against their U.S. taxes for the foreign taxes paid.
Using Savings from Ending Unfair Overseas Tax Breaks to Permanently Extend the Research and Experimentation Tax Credit for Investment in the United States
2. Getting Tough on Overseas Tax Havens:
The Administration's proposal would raise a total of $95.2 billion over the next 10 years through efforts to get tough on overseas tax havens by:
Eliminating Loopholes for "Disappearing" Offshore Subsidiaries
Cracking Down on the Abuse of Tax Havens by Individuals
Withholding Taxes From Accounts At Institutions That Don't Share Information With The United States
Shifting the Burden of Proof and Increasing Penalties for Well-Off Individuals Who Seek to Abuse Tax Havens
Devoting New Resources for IRS Enforcement to Help Close the International Tax Gap
Leveling the Playing Field: Removing Tax Incentives For Moving Jobs Overseas and Curbing Tax Havens
I. Replacing Tax Advantages to Create Jobs Overseas with Incentives to Create Jobs at Home
1. Reforming Deferral Rules to Curb A Tax Advantage for Investing and Reinvesting Overseas
Current Law
Current Law
Companies Can Defer Paying Taxes on Overseas Profits Until Later, While Taking Tax Deductions on Their Foreign Expenses Now
Deferral Rules Use U.S. Taxpayer Dollars to Create A Tax Advantage for Companies That Invest Abroad
Example Under Current Law:
Suppose that two U.S. companies decided to borrow to invest in a new factory. Company A invests that money to build its plant in the U.S., while Company B invests overseas in a jurisdiction with a tax rate of only 10 percent.
Company A will be able to deduct its interest expense, reducing its overall U.S. tax liability by 35 cents for every dollar it pays in interest. But it will also pay a 35 percent tax rate on its corporate profits.
Company B will also be able to deduct its interest expense from its U.S. tax liabilities at a 35 percent rate. But it will only face a tax of 10 percent on its profits.
Thus, our current tax code uses U.S. taxpayer dollars to put companies that invest in the United States at a competitive advantage with companies who invest overseas.
The Administration's Proposal
Level the Playing Field: The Administration's commonsense proposal, similar to an earlier measure proposed by House Ways and Means Chairman Charles Rangel, would level the playing field by requiring a company to defer any deductions - such as for interest expenses associated with untaxed overseas investment - until the company repatriates its earnings back home. In other words, companies would only be able to take a deduction on their U.S. taxes for foreign expenses when they also pay taxes on their foreign profits in the United States. This proposal makes an exception for deductions for research and experimentation because of the positive spillover impacts of those investments on the U.S. economy.
2. Closing Foreign Tax Credit Loopholes
Current Law
Companies Can Take Advantage Of Foreign Tax Credit Loopholes: When a U.S. taxpayer has overseas income, taxes paid to the foreign jurisdiction can generally be credited against U.S. tax liabilities. In general, this "foreign tax credit" is available only for taxes paid on income that is taxable in the U.S. The intended result is that U.S. taxpayers with overseas income should pay no more tax on their U.S. taxable income than they would if it was all from U.S. sources. However, current rules and tax planning strategies make it possible to claim foreign tax credits for taxes paid on foreign income that is not subject to current U.S. tax. As a result, companies are able to use such credits to pay less tax on their U.S. taxable income than they would if it was all from U.S. sources - providing them with a competitive advantage over companies that invest in the United States.
The Administration's Proposal
Reform the Foreign Tax Credit to Remove Unfair Tax Advantages for Overseas Investment: The Administration's proposal would take two steps to rein in foreign tax credit schemes. First, a taxpayer's foreign tax credit would be determined based on the amount of total foreign tax the taxpayer actually pays on its total foreign earnings. Second, a foreign tax credit would no longer be allowed for foreign taxes paid on income not subject to U.S. tax. These reforms would go into effect in 2011, raising $43.0 billion from 2011 to 2019.
3. Making R&E Tax Credit Permanent to Encourage Investment in Innovation in the United States
Current Law
· R&E Credit Is Set to Expire At End of 2009: Under current law, companies are eligible for a tax credit equal to 20 percent of qualified research expenses above a base amount. But the research and experimentation tax credit has never been made permanent - instead, it has been extended on a temporary basis 13 times since it was first created in 1981 - and is set to expire on December 31, 2009.
How It Works
· Through the research and experimentation tax credit, companies receive a credit valued at 20 percent of qualified research expenses in the United States above a base amount. Taxpayers can also elect to take an alternative simplified research credit that provides an incentive for increasing research expenses above the level of the previous three years. Taxpayers may also take a credit based on spending on basic research and certain energy research.
· Any uncertainty about whether the R&E credit will be extended reduces its effectiveness in stimulating investments in new innovation, as it becomes more difficult for taxpayers to factor the credit into decisions to invest in research projects that will not be initiated or completed prior to the credit's expiration.
The Administration's Proposal
· Create Certainty to Encourage New Investment and Innovation at Home By Making the Research and Experimentation Tax Credit Permanent: To give companies the certainty they need to make long-term research and experimentation investment in the U.S., the Administration's budget includes the full cost of making the R&E credit permanent in future years. By making this tax credit permanent, businesses would be provided with the greater confidence they need to initiate new research projects that will improve productivity, raise standards of living, and increase our competitiveness. And with over 75 percent of credit dollars attributed to wages, the credit would provide an important incentive for businesses to create new jobs.
· Paid For With Provisions That Make the Tax Code More Efficient and Fair: This change would cost $74.5 billion over 10 years, which will be paid for by reforming the treatment of deferred income and the use of the foreign tax credit.
II. Getting Tough on Overseas Tax Havens
1. Eliminating Loopholes that Allow "Disappearing" Offshore Subsidiaries
Current Law
Disappearing Subsidiaries Allow Corporations to Shift Income Tax-Free: Traditionally, if a U.S. company sets up a foreign subsidiary in a tax haven and one in another country, income shifted between the two subsidiaries (for example, through interest on loans) would be considered "passive income" for the U.S. company and subject to U.S. tax. Over the last decade, so-called "check-the box" rules have allowed U.S. firms to make these subsidiaries disappear for U.S. tax purposes. With the separate subsidiaries disregarded, the firm can shift income among them without reporting any passive income or paying any U.S. tax. As a result, U.S. firms that invest overseas are able to shift their income to tax havens. It is clear that this loophole, while legal, has become a reason to shift billions of dollars in investments from the U.S. to other counties.
Example under Current Law
Suppose that a U.S. company invests $10 million to build a new factory in Germany. At the same time, it sets up three new corporations. The first is a wholly owned Cayman Islands holding company. The second is a corporation in Germany, which is owned by the holding company and owns the factory. The third is a Cayman Islands subsidiary, also owned by the Cayman Islands holding company.
The Cayman subsidiary makes a loan to the German subsidiary. The interest on the loan is income to the Cayman subsidiary and a deductible expense for the German subsidiary. In this way, income is shifted from higher-tax Germany to the no-tax Cayman Islands.
Under traditional U.S. tax law, this income shift would count as passive income for the U.S. parent - which would have to pay taxes on it. But "check the box" rules allow the firm to make the two subsidiaries disappear -- and the income shift with them. As a result, the firm is able to avoid both U.S. taxes and German taxes on its profits.
The Administration's Proposal
Require U.S. Businesses That Establish Certain Foreign Corporations To Treat Them As Corporations For U.S. Tax Purposes: The Administration's proposal seeks to abolish a range of tax-avoidance techniques by requiring U.S. businesses that establish certain corporations overseas to report them as corporations on their U.S. tax returns. As a result, U.S. firms that invest overseas would no longer be able to make their subsidiaries -- or their income shifts to tax havens -- disappear for tax purposes. This would level the playing field between firms that invest overseas and those that invest at home.
2. Cracking Down on the Abuse of Tax Havens by Individuals
Current Law
A Free Ride for Financial Institutions that Flout Reporting Rules
At Non-Qualifying Institutions, Withholding Requirements Are Easy to Escape
Loopholes Allow Qualifying Institutions to Still Serve as Conduits for Evasion
Legal Presumptions Favor Tax Evaders Who Conceal Transactions
The IRS Lacks the Tools It Needs to Enforce International Tax Laws
Example Under Current Law
Through a U.S. broker, a U.S. account-holder at a non-qualified intermediary sells $50 million worth of securities.
If the seller self-certifies that he is not a U.S. citizen and the non-qualified intermediary simply passes that information along to the U.S. broker, the broker may rely on that statement and does not need to withhold money from the transaction.
As a result, a U.S. taxpayer who provides a false self-certification can easily avoid paying taxes, since the non-QI has not signed an agreement with the IRS, and the IRS may have limited tools to detect any wrongdoing.
Proposal
In addition to initiatives taken within the G-20 to impose sanctions on countries judged by their peers not to be adequately implementing information exchange standards, the Obama administration proposes to make it more difficult to shelter foreign investments from taxation by cracking down on financial institutions that enable and profit from international tax evasion. These measures - expected to raise $8.7 billion over 10 years - would:
Strengthen the "Qualified Intermediary" System to Crack Down on Tax Evaders
Impose Significant Tax Withholding On Transactions Involving Non-Qualifying Intermediaries
Create A Legal Presumption Against Users Of Non-Qualifying Intermediaries
Limit QI Affiliations With Non-QIs
Provide the IRS With The Legal Tools Necessary to Prosecute International Tax Evasion
Increase Penalties for Failing to Report Overseas Investments
Extend the Statute of Limitations for International Tax Enforcement
Tighten Lax Reporting Requirements
3. Hire Nearly 800 New IRS Staff to Increase International Enforcement: As part of the President's budget, the IRS would be provided with funds to support the hiring of nearly 800 new employees devoted specifically to international enforcement. The funding would allow the IRS to hire new agents, economists, lawyers and specialists, increasing the IRS' ability to crack down on offshore tax avoidance and evasion, including through transfer pricing and financial products and transactions such as purported securities loans. According to estimates by the IRS, every additional dollar invested in enforcement in recent years has yielded about four dollars in added tax revenues.
Health care mandate
After if became clear that a mandate to purchase insurance would be part of the health care reform bill, questions were raised about whether or not this violated not only President Obama's opposition to a mandate, but also his promise not to raise taxes. Was a mandate to purchase health insurance under threat of punishment equivalent to a tax increase? This lead to the following conversation in an interview with George Stephanopoulos.
Stephanopoulus: You were against the individual mandate during the campaign. Under this mandate, the government is forcing people to spend money, (and) fining you if you don't. How is that not a tax?
Obama: Well hold on a second George, Here's what's happening. You and I are both paying $900 bucks on average ... on average ... our families ... in higher premiums because of uncompensated care. Now what I've said is that if you can't afford health insurance, you certainly shouldn't be punished for that, that's just piling on. If on the other hand we're giving tax credits, we've set up an exchange, you are now part of a big pool, we've driven down the costs, we've done everything we can, and you actually can afford health insurance, but you've just decided, "You know what, I just want to take my chances." And then you get hit by a bus, and you and I have to pay for the emergency care.
Stephanopoulus: That may be, but it is still a tax increase
Obama: No, that's not true George. For us to say that you've got to take responsibility to get health insurance is absolutely not a tax increase, what it's saying is that we're not gonna have other people carrying your burdens for you, anymore than the fact that right now, everybody in America, just about, has to get auto insurance. Nobody considers that a tax increase. People say to themselves "That is a fair way to make sure that if you hit my car, then i'm not covering all the costs.
Stephanopoulus: Well, it may be fair, it may be good public policy ...
Obama: But George, you can't just make up that language and decide that that's called a tax increase. If I say that right now, your premiums are going to be going up by 5 or 8 or 10 percent next year, and you say "Well that's not a tax increase," but on the other hand if I say that I don't want to have to pay for you not carrying coverage even after I give you tax credits that make it affordable ...
Stephanopoulus: I don't think that I am making it up, Merriam Websters dictionary ... Tax - a charge, usually of money imposed by authority on persons or property for public purposes.
Obama: George, the fact that you looked up Merriams dictionary, the definition of tax increase, indicates to me that you're stretching a little bit right now. Otherwise you wouldn't have gone to dictionary to check on the definition.
Stephanopoulus: Well no .. I wanted to check for myself, but your critics say it is a tax increase
Obama: My critics say everything is a tax increase. My critics say that i'm taking over every sector of the economy. You know that. Look, we can have a legitimate debate over whether we're gonna have an individual mandate or not ...
Stephanopoulus: But you reject that notion, that it's a tax increase.
Obama: I absolutely reject that notion
The Bush Tax Cuts
During the campaign for the Presidency, President Obama often referred to the 2001 and 2003 Bush tax cuts and the "Bush tax cuts for the rich." He repeatedly stated his plans to end the tax cuts and the only discussion was whether to end them immediately or allow them to expire in 2010.
On July 24, 2010 President Obama used his weekly address to speak about both the financial reform legislation which had recently passed, but also to speak about the tax cuts and proposals put forth by the Republican party. The Republicans had proposed making the 2001 and 2003 "Bush Tax Cuts" permanent. President Obama addressed that plan at 3:25 in the address.
... and third. Even though his party voted against tax cuts for middle class families, he would permanently keep in place tax cuts for the very wealthiest Americans. The same tax cuts that have added hundreds of billions to our debt. These aren't new ideas. They're the same policies that led us into the recession. They won't create jobs, they will kill them. They won't reduce the deficit, they will add a trillion dollars to our deficit.
In September of 2010, President Obama and many Democrats were attempting to extend most of the Bush Tax cuts, but allow the tax cuts on capital gains and on the highest income bracket to return to higher levels. Republicans attempted to force an all or nothing package that either extended all tax cuts or none of them. President Obama referred to the this as holding the tax cuts for middle Americans hostage. In Cleveland, Ohio President Obama spoke at a campaign style rally.
I'll give you one final example of the differences between us and the Republicans. And that's on the issue of tax cuts. Under the tax plan passed by the last administration, taxes are scheduled to go substantially next year. For everybody. By the way, this was by design. When they passed these tax cuts in 2001 and 2003, they didn't want everybody to know what it would do to our deficit, so they pretended like they were gonna end, even though now, they say they don't. Now I believe that we ought to make the tax cuts for the middle class permanent. For the middle class ... permanent.
Days later, President Obama spoke at a press conference at the White House and again insisted that he wanted to extend provisions of the Bush tax cuts and that it was Republican opposition that was stopping them.
... and if the other party continues to hold these tax cuts hostage ... These are the same families that will suffer the most when their taxes go up next year. And if we can't get an agreement with Republicans, that's what will happen. So we don't have time for any more games. I understand that there's an election coming up. But the American people didn't send us here to just think about our jobs, they sent us here to think about theirs.
The day after the 2010 elections, President Obama used his weekly address to speak about the Bush tax cuts. He stated that his desires were to compromise with Republicans in the lame duck session and extend all Bush tax cuts except those for people making over $250,000 a year.
Health Care and Taxes
During the 2008 Presidential debate, Senator Obama spoke about his health care plan and compared it to Senator McCain's plan. He noted his promise that he would not raise taxes on anyone making less than $250,000 per year. He stated that Senator McCain could not make that pledge because he was proposing a tax on cadillac health care plans. The 2009-2010 health care reform did indeed contain these taxes.
I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes. And my opponent can't make that pledge and here's why: For the first time in American history, John McCain wants to tax you health care benefits. Apparently Senator McCain doesn't think that it's enough that health care premiums have doubled, he thinks that you should pay taxes on them too. That's a $3.6 trillion dollar tax increase potentially on middle class families.
As part of campaign literature from the 2008 campaign, Senator Obama stated that the plan was deficit neutral and was paid for in part by holding the estate tax at the 2009 rate, and by allowing the Bush tax cuts to expire for those making more than $250,000.
2008 Campaign Website Statements
The Obama-Biden Plan
Barack Obama and Joe Biden’s tax plan delivers broad-based tax relief to middle class families and cuts taxes for small businesses and companies that create jobs in America, while restoring fairness to our tax code and returning to fiscal responsibility. Coupled with Obama and Biden's commitment to invest in key areas like health, clean energy, innovation, and education, their tax plan will help restore bottom-up economic growth that creates good jobs in America and empowers all families to achieve the American dream.
Obama’s Comprehensive Tax Policy Plan for America will:
Cut taxes for 95 percent of workers and their families with a tax cut of $500 for workers or $1,000 for working couples.
Provide generous tax cuts for low- and middle-income seniors, homeowners, the uninsured, and families sending a child to college or looking to save and accumulate wealth.
Eliminate capital gains taxes for small businesses, cut corporate taxes for firms that invest and create jobs in the United States, and provide tax credits to reduce the cost of healthcare and to reward investments in innovation.
Dramatically simplify taxes by consolidating existing tax credits, eliminating the need for millions of senior citizens to file tax forms, and enabling as many as 40 million middle-class Americans to do their own taxes in less than five minutes without an accountant.
Under the Obama-Biden Plan:
Middle class families will see their taxes cut -- and no family making less than $250,000 will see their taxes increase. The typical middle class family will receive well over $1,000 in tax relief under the Obama-Biden plan, and will pay tax rates that are 20 percent lower than they faced under President Reagan.
Families making more than $250,000 will pay either the same or lower tax rates than they paid in the 1990s. Obama will ask the wealthiest two percent of families to give back a portion of the tax cuts they have received over the past eight years to ensure we are restoring fairness and returning to fiscal responsibility. But no family will pay higher tax rates than they would have paid in the 1990s.
The Obama-Biden plan will cut taxes overall, reducing revenues to below the levels that prevailed under Ronald Reagan (less than 18.2 percent of GDP). The plan is a net tax cut -- his tax relief for middle class families is larger than the revenue raised by his tax changes for families over $250,000. Coupled with his commitment to cut unnecessary spending, Obama will pay for this tax relief while bringing down the budget deficit.
Impact of the Obama Tax Plan
Who
Tax Cut
Married couple making $75,000 with two children, one of whom is in college
$3,700
[includes $1,000 Making Work Pay; $500 universal mortgage credit; and $4,000 college credit net of current college credits]
Married couple making $90,000
$1,000
[$1,000 Making Work Pay tax credit]
Single parent making $40,000 with two young children and childcare expenses
$2,100
[includes $500 Making Work Pay; $500 universal mortgage credit; and $1,100 from expansion of the child care tax credit]
70-year-old widow making $35,000
1,900
[reflects elimination of income taxes for seniors earning under $50,000]
Wall Street Journal Analysis of budget
A March 10, 2010 analysis of President Obama's actual budget is critical of the President's budget and claims that there are new taxes which violate the promise not to raise taxes on those making less than $250,000.
Nearly $3 Trillion in Tax Increases
Last year, President Obama promised that "if your family earns less than $250,000 a year, you will not see your taxes increased a single dime. I repeat: not one single dime." Yet even before the budget was released, he signed into law a 62 cent tobacco-tax increase that has a disproportionate negative effect on lower-income smokers. He has endorsed the $846 billion cap-and-trade tax passed by the House in 2009, which electric utility companies, oil refiners, natural gas producers, and other energy producers would immediately pass on to consumers, including those earning less than $250,000. Consequently, President Obama's budget would raise everyone's taxes.
The President has pared back some tax cuts proposed last year (the making-work-pay tax credit would now expire in 2013). He also proposes new tax cuts, some of which are helpful (automatic enrollment in Individual Retirement Accounts would help more people save for retirement) and others that are not (expansion of the child and dependent care tax credit is biased toward those who choose paid child care over staying home with their children).
A nearly $1 trillion tax increase is reserved for couples earning more than $250,000 and individuals earning more than $200,000. Beginning in 2011, the President's budget will increase these Americans' taxes by:
•Raising the top two income tax brackets from 33 percent to 36 percent, and from 35 percent 39.6 percent ($364 billion);
•Raising capital gains and dividends tax rates from 15 percent to 20 percent ($105 billion);
•Phasing out personal exemptions and limiting itemized deductions ($208 billion); and
•Reducing the value of tax deductions by approximately one-fourth ($291 billion).
This $1 trillion tax hike would fall on the backs of only 3.2 million tax filers--an average tax hike of more than $300,000 per filer over 10 years on a group that is already shouldering an increasing portion of the income tax burden.
Moreover, businesses and upper-income individuals would also pay a substantial burden of the proposed $743 billion in new taxes to finance the President's health care reform. American businesses, trying to compete globally despite the world's second-highest corporate tax rate, would also face an additional $468 billion in various new taxes at a time when they are--according to the White House--supposed to be getting back on their feet and begin hiring new employees.
Weekly Address - Taxes
In October of 2010, President Obama used his weekly address to promote tax credits. He stated that Republicans were protecting tax cuts for companies who outsourced jobs overseas.
Voting Record
The Alternative Minimum Tax
The alternative minimum tax was created to ensure that a few of the richest Americans did not exploit loopholes to avoid paying any taxes. It was never intended to be a method of taxing the general population. Unfortunately, the amount that a person earns before the tax goes into effect was not indexed to inflation. Therefore, each year Congress must enact a "fix" to adjust the amount. Occasionally, a larger increase is proposed than inflation adjustment. Income from the tax was accounted for in the 2009 budget. According to the rules of PAYGO (Pay As You Go), a decrease in the amount of money taken in must be offset by a reduction in spending. This amendment sought to exempt the AMT from that rule, to more accurately reflect the purpose of the tax. The amendment failed with most Republicans supporting it and most Democrats opposing it in a 47-51 vote. Barack Obama voted against the amendment to exempt the AMT from PAYGO rules.
Barack Obama voted against the amendment to exempt the AMT from PAYGO rules.
The Estate Tax
The estate tax is a tax levied on the assets or estates of wealthy individuals when they pass away. The tax collects a percentage of the estates which are valued above a given amount. This amendment sought to raise the value of the estates affected from $1 Million to $5 Million, and to lower the maximum rate at which the estate can be taxed from 45% to 35%. The argument for the change was that many small farms now fell under this tax. The opposition stated that not enough revenue would be collected is the amount was raised, as the tax would affect only 0.2% of estates instead of 0.5% under the current limits. The amendment failed in a 50-50 vote with most Republicans supporting the amendment and most Democrats opposing it. Barack Obama voted against the amendment to raise the value of the estates affected to $5 Million and to lower the maximum rate to 35%.
Barack Obama voted against the amendment to raise the value of the estates affected to $5 Million and to lower the maximum rate to 35%.
The Estate Tax
In 2007, an amendment was proposed which would have raised the value of applicable estates to $5 Million and set the maximum rate at 35%. This amendment would have also made the 2006 extended rates for capital gains and dividends permanent. The amendment was supported by most Republicans and opposed by most Democrats and failed in a 47-51 vote. Barack Obama voted against the amendment to raise the value of applicable estates to $5 Million and set the maximum rate at 35%.
Barack Obama voted against the amendment to raise the value of applicable estates to $5 Million and set the maximum rate at 35%.
Full Repeal of AMT
In 2007, congress made and attempt to repeal the alternative minimum tax (AMT) completely. The legislation was defeated in a 44-53 vote with most Republicans supporting the legislation and most Democrats opposing it. Barack Obama voted against repealing the AMT.
Barack Obama voted against repealing the AMT.
Pension Protection Act of 2006
The Pension Protection Act of 2006 addressed regulations governing employer-sponsored pensions and acted to make the portions of the 2001 act which allowed higher contributions to IRAs. with the support of both parties. The bill got wide support from both parties and passed 93-5. Barack Obama voted in favor of the Pension Protection Act of 2006.
Barack Obama voted in favor of the Pension Protection Act of 2006.
Estate Tax and Extension of Tax Relief Act
In 2006, the senate voted on theEstate Tax and Extension of Tax Relief Act. This bill would have increased the estate tax exclusion to $5,000,000, effective 2015, and repealed the sunset provision for the estate and generation-skipping taxes. It would also have lowered the estate tax rate to equal the current long-term capital gains tax rate for taxable estates up to $25 million and repealed the estate tax deduction paid to states. The bill failed to pass in a 56-42 vote. Barack Obama voted against the Estate Tax and Extension of Tax Relief Act.
Barack Obama voted against the Estate Tax and Extension of Tax Relief Act.
Death Tax Repeal Permanancy Act
In 2006, the Senate voted on legislation that would have permanantly repealed the "Death" or Estate Tax. The legislation was rejected on a 57-41 vote. Most Republicans supported the legislation and most Democrats opposed it. Barack Obama voted against ending the Death Tax.
Barack Obama voted against ending the Death Tax.
Tax Increase Prevention and Reconciliation Act of 2005
The Tax Increase Prevention and Reconciliation Act of 2005 extended previously lowered dividend income and capital gains through 2010, and made an increase to the AMT exemption. It also eliminated income restrictions on high-income taxpayers for converting traditional Individual Retirement Accounts (IRAs) to Roth IRAs. Most Republicans supported the legislation and about 1/3 of teh Democrats supported it. The bill passed in a 66-31 vote. with the support of both parties. Barack Obama voted against the Tax Increase Prevention and Reconciliation Act of 2005.
Barack Obama voted against the Tax Increase Prevention and Reconciliation Act of 2005.
Sponsored and Cosponsored Legislation
This representative has not been identified as sponsoring or cosponsoring significant legislation related to this title.
References
[1]Website: Wall Street Journal Article: Obama's 95% IllusionAuthor: NA Accessed on: 06/10/2010
