Barack Obama was talking to a prosperous Ohio plumber the other day about taxes. Obama said, “My attitude is that if the economy’s good for folks from the bottom up, it’s gonna be good for everybody … I think when you spread the wealth around, it’s good for everybody.”
Obama’s comment about “spreading the wealth around” reverberated with a Wall Street Journal editorial, “Obama’s 95% Illusion,” that emphasized that “Obama’s Tax Plan Is Really a Welfare Plan.” In the blogosphere, many writers reacted by taking the cheap shot and calling Obama a socialist / communist.
Wow. I’ve not been paying enough attention to the details of Obama’s plan to distribute money to low wage earners. Getting more money into the hands of ordinary people sounds great to me. And if the tax system can help us accomplish such a goal, then why would we not do so? I didn’t, until now, realize that Obama’s plan involves sending checks to qualifying citizens who pay no income tax. I like the idea. The important consideration is not whether by some definition this is “socialism,” the question is: Will this action impact our economy to add to the general increase of wealth? The question is: Will this action result in a more fair distribution of wealth?
Obama’s claim to the plumber was that by providing more income to the poor, taxpayers, like the plumber himself, would benefit. The more money that is in the system, the more money that will be available to build up the plumber’s business.
Maybe, the fact that John McCain has not publically attacked this feature of Obama’s tax plan is reflective of the fact that McCain does not want to bring more light or more understanding to what it is that Obama, in fact, is proposing. McCain and his campaign may have wisely concluded that the less voters really understand Obama’ tax plan, the better.
Here is Michael Goldfarb, a spokesperson for John McCain, reacting to Obama’s comments: “If Barack Obama’s goal as President is to ‘spread the wealth around,’ perhaps his unconditional meetings with Hugo Chavez, Raul Castro, and Kim Jong-Il aren’t so crazy — if nothing else they can advise an Obama administration on economic policy. In contrast, John McCain’s goal as president will be to let the American people prosper unburdened by government and ever higher taxes.”
And so, Goldfarb’s answer to how to increase wealth and how to dirtribute it fairly is less government, more freedom in the market, more tax breaks for the wealthy. Thank you very much, Mr. Goldfarb. It is amazing that a “spokesperson,” who I’m assuming is highly paid, could sound so out of touch. Hasn’t reality, just recently, slapped us in the face? We even now are reaping the whirlwind of devastation from an economy “unburdened by government,” the devastation of going into debt by giving massive tax cuts to the most wealthy. What constitutes economic justice, economic fairness, should be at the heart of political debate in a democracy, but Goldfarb’s comments, hitting the same notes that might have worked in 1980, shows how bankrupt / unserious McCain’s ideas are.
The WSJ listed these credits from Obama’s tax plan:
- 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.
But the Journal warned: “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 non taxpayers. 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.”
I googled “income redistribution” and found an interesting web-site by an author named Robert D. Feinman. He writes,
“We in the US need to decide if we are going to slip into an inefficient oligarchy, risk civil unrest or redirect our resources and wealth into more equitable avenues. No society is perfectly egalitarian, but when we have reached a point where the top one fifth in Manhattan makes $350,000 and the bottom fifth makes $7,000 we are probably near an economic tipping point. How we deal with the coming challenge is up to us.”
Feinman quotes Herbert Stein: “If something cannot go on forever, it will stop.”
In an essay entitled, “Eliminate US Poverty,” Feinman writes, “People have been offering programs to eliminate poverty for 2000 years, yet it persists in the richest country on earth. I claim the reason for poverty is that poor people don’t have enough money, it’s that simple. … Supposed we tried something that has never been done before, guaranteeing a minimal standard of living to everyone. The country is certainly wealthy enough to afford this. The most optimistic poverty programs don’t even approach the amount of money being spent on Iraq, for example. Well there would be objections about those people who don’t “deserve” it. There would, supposedly, be a rise in free loaders. That’s OK too, we can afford some free loaders as well. This can be kept under control by social disapprobation. Just like Humvees are falling out of favor with the rich, because of the visible sight of waste it presents, those not doing their part could be made to feel uncomfortable.
“What would be the benefits? Higher incomes would lower crime, improve health care, create a better educated workforce and produce a reduction in class resentment. Eliminating the expenses of crime control and remedial health care could easily exceed the costs of the program.
“What is preventing this? A distortion of the Judeo-Christian precepts of charity. Rather than helping those less fortunate, a mean-spirited brand of Puritanism underlies much of political policy, and, implicitly or explicitly, seeks to punish or blame the victims.
“How could this be financed? There are any number of ways, equalizing tax collections so that the wealthy pay more, eliminating runaway militarism and using the money for social programs, or taxing corporate earnings more effectively, for example. Let’s assume that we provide, on average, $10,000 to each of the approximately 40 million poor people in the US. This comes to $400 billion per year. For reference this is slightly less than the US military budget.”
