3 posts tagged “tax plans”

McCain has started attacking Obama’s tax plans.  This is a area that the Republicans have, hitherto, failed to make much political ground.  The American people resent taxes almost more than any other country being more transparent and less amenable to efficient tax planning than most other jurisdictions.  As a result, it has been surprising that the Republicans have not made more of an issue with Obama’s repeated assertion that those earning more should pay more to the government.

The main problem with this is that they already do.  The top 5% of taxpayers already pay just under 60% of the tax revenue from federal income tax.  At what point does increasing tax on these people, as Obama advocates, kill the goose that is laying the golden eggs?  Or in economic terms when does this decrease economic efficiency and activity?  McCain has a legitimate point when he states that America was not built on spreading the wealth but on creating it.

In these troubled times this is a hard message to get across.  The American people know that this is the case intuitively.  They need McCain and the Republican party to articulate this as a rebuttal to the Obama and the Democratic party’s contention that because a segment of people can ‘afford’ something that is the right thing to do.  Such economic populism might get a party elected but it also destroys the great turbine of growth that is the American economy.

A public debate that has been set off by the third Presidential debate over the last few days is that of redistribution versus just reward for hard work.  This is an issue that touches the heart of America’s identity.  The Democrats plan to increase the tax burden for anyone earning over $250,000.  This naturally draws a great deal of popular support in that only perhaps less than 5% of the American actually make such an amount.

But there are two complications to such an obvious, and populist vote winner.  The first is factual and the second is aspirational.  The fact that the top quartile of all American tax payers contributes approximately 70% of all tax receipts and the top 5% of American tax payers 35% shows how important these people are to the collection of taxes in the first place.  Increased taxation will make this category not only less rich but also less productive.  This has a real impact on the economy as well as shrinking private activity in the economy to public activity in the work place.  McCain (perhaps too late) has therefore pounced on these measures as being fundamentally ‘un-American.’ 

Aspirationally, Americans are taught that they can reach the sky and conquer the world.  Increasing taxes on the richest dents that ambition because it creates more of an equivalence between doing something and not.  Though this might seem absurd to many who see the poverty and the helplessness of huge sections of the populations – raising taxes on the rich is doing nothing to increase the absolute material position of these people.  Raising taxes on the highest earners is a relative measure whose immediate effect is to increase the size of the government vis-à-vis everyone.

If McCain was a plane he would be a short range attack one.  If Obama were a plane he would be a long range bomber.  As a result the debate this evening was a fly past of different machines, at different heights just out of each other’s shooting range.  Time and again it was McCain that tried to reach the dizzying heights that Obama still commands.

The financial crisis, energy independence, climate change, tax plans, abortion, dodgy connections, government waste, negative campaigning and education were all issues on which McCain tried to erode the smug looking assurance of his adversary.  McCain’s passion was as palpable as Obama’s unflappability.  Obama managed to dispatch his sparring companion’s attacks.  There was nothing that changed the ordering of the game (as well might be expected). 

The media will not have anything to seize upon of substance from this evening.  The momentum is strongly against McCain and there is little time left now to get back in the game.  He will struggle from this point on in the mainstream media to prove that he can control the course of events better than Obama.  But the truth of the matter is that the events that have taken control of the situation are those that are outside the debating hall.