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When Tax Cuts Aren’t Tax Cuts

How socialist income redistribution is disguised by political candidates for votes

One of the biggest challenges facing both John McCain and Barack Obama in their commitment to provide tax relief to working-class Americans is the simple fact that millions of them already pay no personal income taxes.

According to the most recent IRS statistics for 2006, some 45.6 million tax filers — one-third of all filers — have no tax liability after taking their credits and deductions. For good or ill, this is a dramatic 57 percent increase since 2000 in the number of Americans who pay no personal income taxes.

Tax Foundation estimates show that if all of the Obama tax provisions were enacted in 2009, the number of these “nonpayers” would rise by about 16 million, to 63 million overall. If all of the McCain tax proposals were enacted in 2009, the number of nonpayers would rise by about 15 million, to a total of 62 million overall.

Most tax credits can only reduce a taxpayer’s amount due to zero, but the EITC and the child tax credit were also made refundable, meaning that taxpayers are eligible to receive a check even if they have paid no income tax during the year. Those tax returns have become, in effect, a claim form for a subsidy delivered through the tax system rather than a direct payment from a traditional government program like welfare or farm supports.

Both the McCain and Obama plans would increase this number by expanding existing tax benefits or creating new ones. Senator McCain is proposing one expanded provision — the dependent exemption — and one new credit, a $5,000 refundable health care tax credit. The Obama plan contains seven new provisions, including a new “Making Work Pay Credit,” a “Universal Mortgage Credit,” and a plan to eliminate income taxes for seniors earning under $50,000.

About one-third of tax filers pay no income tax at all. So how can Obama claim to cut taxes for “95%”? He can’t (at least honestly). Not only does his plan increase the number of people who pay no tax at all from about 1/3 to almost 1/2, but additionally gives handouts to those who pay no taxes at all. That’s welfare under a different name. But you can’t put lipstick on the pig and change the pig — welfare disguised as tax cuts is still welfare.

Both McCain’s and Obama’s plans are socialist. If someone pays zero tax, it’s mathematically impossible to cut it — yet both candidates call their Robin Hood programs “tax cuts”.

McCain had it right earlier to criticize Obama’s plans — Obama calls them “tax cuts”, but any third grader knows better (McCain was correct, but the criticism applies to his plan as well). Obama’s plan is socialist income redistribution (take money from those who earned it and give it to others — “spread the wealth around”); it has to be disguised because if Obama is honest and calls his plan what it is (a giant expansion of welfare — even Clinton knew welfare was broken, and the country should “end welfare as we know it”, not expand a broken system which encourages people to live out of the public trough), it would be rejected as the giant welfare program it is.

Is it really good public policy to have half the country not support the government? How much should the “rich” pay? Do the rich pay their fair share? What happens when the majority of people pay no taxes, and in fact receive welfare payments from the Federal government?

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess from the public treasury. From that time on the majority always votes for the candidates promising the most benefits from the public treasury, with the results that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. [Quote attributed to several people, but commonly Sir Alex Fraser Tytler (1742-1813)]

If voters really want socialist programs and are willing to vote for them (knowing those policies will eventually cause the country to collapse — think of current mess with Fannie/Freddie multiplied hundreds of times), let’s at least be honest about it — instead of hiding the truth in attempts to fool people into supporting something they’d really be against if they knew the truth. (Corollary: Why do liberals fear being called liberals?)

At least if people have information they’ll know voting for these proposals guarantees a more serious financial meltdown later which makes current events look like child’s play — and we haven’t even begun to talk about Social security bankrupt and the ignoring of warnings about Social Security’s (and other entitlements) destructive impact on the economy of the future.

There is no free lunch — the bill for these handouts will come due, and no amount of “soak the rich” can possibly pay for it. Candidates are simply destroying the future (after they’re out of office) to buy votes today. We don’t completely blame Democrats — they don’t have the big spending reputation for nothing, after all — it’s the Republicans which continue to go along with the big-government, lets-try-a-free-lunch Democrats which guarantees we’ll have many more financial messes to deal with making the current trillion dollar bailout look like pocket change.

There is no free lunch, and promising one is dishonest.

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1 Comment

  1. Tiffany Nobel says:

    Check out the book “The Great Wall Street Retirement Scam, What They dont want you to know about IRAs, 401ks and other plans” written by Rick Bueter. I found it on Amazon.com and its the best book about money you will ever read!

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