Obamanomics - an exploration of Obama's economic philosophy (small business, percentage, pension)

[StoneOne]

Given the lower primate intelligence of most posters in the Politics forum, I thought this would be a better forum for this article. The New York Times did a fascinating exploration of Obama's economic philosophy and its ongoing development. The overall conclusion is that Obama is, at heart, much more right of center and much more left of center than many people would simplistically put him.

http://www.nytimes.com/2008/08/24/ma...pagewanted=all

[Niners fan]

Interesting article. I hope it is accurate with respect to Obama's positions.

There are a few things that bother me Obama's and the Democrats' reasoning. I will try to keep this fairly business oriented since this is not the political forum.

1) Tax cuts do not lead to deficits, nor have they in the past. Increased spending has led to deficits. I have posted before about Hauser's law which states that the Federal Government has collected 19.5% of GDP over the last 60 years regardless of the marginal tax rates. Therefore, it is in the best interest of the economy and the citizens to keep marginal tax rates low. (For those who have not seen the link to Hauser's law here it is: You Can't Soak the Rich - WSJ.com )

2) It is not the government's job to redistribute wealth. When government does redistribute wealth it does it very inefficiently which is a drag on the economy in general.

3) Obama's proposal to raise taxes on the "rich" will be a big burden on S-Corporations. There are millions of small business owners (like me) whose AGI is inflated on their personal tax returns because they are S-Corps. Small businesses are the heart of the economy both for jobs and innovation.

4) The tax doughnut Obama would create for payroll taxes is unsettling. He would start taxing income above $250,000 for Social Security and Medicare. It would be very expensive for companies, particularly the self-employed and aforementioned S-Corps. It is not hard to see how the tax rate could rise to the pre-Reagan rate of 60% again with this tax and his income tax rate proposals. His tax doughnut would not address the real problem with Social Security and Medicare which only going to be solved by reducing benefits.

5) Obama's ideas imply that he doesn't recognize that business consider the cost of an employee and not simply the employee's wage.

[artifice]

Originally Posted by Niners fan

Interesting article. I hope it is accurate with respect to Obama's positions.

There are a few things that bother me Obama's and the Democrats' reasoning. I will try to keep this fairly business oriented since this is not the political forum.

1) Tax cuts do not lead to deficits, nor have they in the past. Increased spending has led to deficits. I have posted before about Hauser's law which states that the Federal Government has collected 19.5% of GDP over the last 60 years regardless of the marginal tax rates. Therefore, it is in the best interest of the economy and the citizens to keep marginal tax rates low. (For those who have not seen the link to Hauser's law here it is: You Can't Soak the Rich - WSJ.com )

2) It is not the government's job to redistribute wealth. When government does redistribute wealth it does it very inefficiently which is a drag on the economy in general.

3) Obama's proposal to raise taxes on the "rich" will be a big burden on S-Corporations. There are millions of small business owners (like me) whose AGI is inflated on their personal tax returns because they are S-Corps. Small businesses are the heart of the economy both for jobs and innovation.

4) The tax doughnut Obama would create for payroll taxes is unsettling. He would start taxing income above $250,000 for Social Security and Medicare. It would be very expensive for companies, particularly the self-employed and aforementioned S-Corps. It is not hard to see how the tax rate could rise to the pre-Reagan rate of 60% again with this tax and his income tax rate proposals. His tax doughnut would not address the real problem with Social Security and Medicare which only going to be solved by reducing benefits.

5) Obama's ideas imply that he doesn't recognize that business consider the cost of an employee and not simply the employee's wage.

Great Post! You are one of the few that get it. I am a SBO as well and don't understand Obama's need to come after us. Capital Gains is another area of concern as seniors draw from pensions and 401k's that would double in taxes under Obama. Not to mention college 529 plans and education 401k's. SBO's account for 75% of all new jobs in this country over the last several years, if you tax us out of the market where will the jobs come from?

[Mircea]

Originally Posted by Niners fan

4) The tax doughnut Obama would create for payroll taxes is unsettling. He would start taxing income above $250,000 for Social Security and Medicare. It would be very expensive for companies, particularly the self-employed and aforementioned S-Corps. It is not hard to see how the tax rate could rise to the pre-Reagan rate of 60% again with this tax and his income tax rate proposals. His tax doughnut would not address the real problem with Social Security and Medicare which only going to be solved by reducing benefits.

The solution there is to use methods already in use. Certain classes of employers are grandfathered on minimum wage payments with respect to social security.

As a restaurateur, you aren't paying social security taxes based on the new minimum wage of whatever it is an hour for tipped employees, you're paying social security wages based on the old 1974 rate for tipped employees.

They can remove the cap for individuals while leaving the cap for employer's social security tax contributions in place. In fact that's been proposed as a long term solution for social security.

Originally Posted by Niners fan

5) Obama's ideas imply that he doesn't recognize that business consider the cost of an employee and not simply the employee's wage.

I wouldn't disagree there. Apparently he's confused between the wage cost and the labor cost.

[lchoro]

The Hauser presentation is very flawed. Notice that he intentionally drew the scale such that the variations in tax receipts as a percentage of GDP appear small. They've varied from 14 to 21 percent in the last eight years alone. He also fails to exclude the payroll tax receipts which are indexed to rise as wages inflate. Income tax receipts kept falling for three years after Bush's tax cuts were enacted. There are a number of other factors that added to tax receipts massively during 2004-2007 which are completely ignored as well, such as the housing bubble and the spending on the war and the military buildup.