Obama's Tax Redistribution Plan

"The collection of any taxes which are not absolutely required, which do not beyond reasonable doubt contribute to the public welfare, is only a species of legalized larceny ... the wise and correct course to follow in taxation is not to destroy those who have already secured success, but to create conditions under which everyone will have a better chance to be successful." -- Calvin Coolidge’s inaugural address

If only we had Calvin Coolidge around.

Democratic presidential candidate Barack Obama wants wealthy wage earners to pay more Social Security taxes. "Among the options that are available, the best one is to lift the cap on the payroll tax, potentially exempting folks in the middle — middle-class folks — but making sure that the wealthy are paying more of their fair share, a little bit more," he said.

Obama’s cuts include a tax credit for working families of $500 for a one-earner household, $1,000 if both adults are employed. The Obama campaign states this would eliminate income taxes for families making less than $40,000 a year. Obama pays for his plan in part by raising the top tax rate on capital gains and dividends to 25 percent.

The Tax Foundation has studied his plans. Obama will hit high income states, high income earners:
"Of more concern to Prante is the prospect of taxing high-wage income at rates well above 50 percent. Obama has called for the top federal income tax rate to revert from 35 percent to 39.6 percent. Add to that an uncapped payroll tax rate and the typical state's top income tax rate, and the result is a top marginal tax rate of between 55 and 61 percent."

Hard numbers on Obama's Tax Redistribution Plan:

"In short, the Obama plan would redistribute more than $130 billion per year from the top 1 percent of taxpayers to all other taxpayers. In 2009, for example, Tax Policy Center figures show that after the income-shifting in the Obama plan, the top 1 percent of taxpayers would pay a greater share of the total federal tax burden than the bottom 80 percent of Americans combined. In other words, 1.13 million Americans would pay more in all federal taxes than 128 million of their fellow citizens combined."

"These figures do not include the impact of Obama's proposal to apply Social Security payroll taxes on incomes above $250,000. According to Tax Policy Center estimates, this plan would increase the tax burden of top earners by an additional $40 billion in 2009 alone and more than $629 billion over the next ten years. By itself, the $40 billion tax hike is twice as much as all the federal taxes paid by people in the bottom quintile combined."

There is one simple problem with these massive tax increases on the rich. THEY WON'T WORK. They will not raise the money because the 'rich' will flee to tax avoidance and tax shelters and even stop investing and producing rather than fork over 50% of earnings to the Federal Government.

Obama tax plan too big a burden on rich, some say:

John Laitner, the director of the University of Michigan Retirement Research Center, said Social Security was designed as an insurance system, in which people paid premiums and later drew benefits. But Obama's plan moves Social Security "further in the direction of redistribution," he said. ... "Obama raises revenue from the rich in the worst way possible," said Gerald Prante, senior economist at Washington's Tax Foundation, a research group. Many economists said that taking bigger chunks of people's income discourages them from spending and investing.

McCain camp reaction: "Barack Obama voted 94 times to raise taxes in just three years in the Senate. Any suggestion that he’ll lower taxes for hard-working New Hampshire families is an insult to their intelligence,” said Jeff Grappone, McCain’s New England communications director. Facts are facts. Barack Obama has promised higher income taxes, Social Security taxes, capital gains taxes, dividend taxes and tax hikes on small businesses. These tax hikes will hit middle class Americans and seniors hardest, and it’s change we can’t afford."

Obama's bash-the-rich politics might work for him, but he's extending a trend where the rich already pay lopsided amount of income tax - in 2005, the top 20 percent of households paid 86.3 percent of income taxes while the bottom 80 percent paid a collective 13.7 percent of the income tax burden. The top 1 percent of households paid 38.8 percent of income taxes.

A blog comment discussing this says: "One of the important functions of government is to control the distribution of wealth."

The response says: "Really? My copy of the Constitution is strangely missing this. Maybe you think it is, but that's purely your opinion. As a libertarian, I most certainly do not agree. Stealing from the rich to give to the poor might make a good fairy tale, but it's still theft."

Just so. It's not limited Government. We have come a long way down the path from Constitutional Government and Coolidge to Socialistic redistribution and Obama. What Obama offers is tax-the-rich socialism, wrapped and marketed in a way to make it palatable to middle-class voters ("Hey, I get a teeny welfare payment they call a tax cut!"). Both for the sake of prosperity and the sake of liberty, we should reject the snares of redistributive tax increases.