In her WSJ column today, Kimberly Strassel takes a close look at Obama’s magical promises.
For example, Obama promises to cut income taxes for 95% of American working families. The trouble is that only 40% earn enough to have any income tax to pay. How do you pull that rabbit out of the hat? By “refundable tax credits” — that is, by having the federal government write checks to people who don’t pay taxes. It’s just income redistribution when you ignore the razzle-dazzle.
Furthermore, the increased taxes on “the rich” he advocates would fall on quite a few people who only look rich on paper. That’s because they are owners of Subchapter S corporations and the net income of the business is passed through to their tax returns. With the imputed income, they may have adjusted gross income figures of, say, half a million dollars, but actually earn and live on much less than that. An increase in income tax rates compels the company to pay out higher dividends to cover the liability of the shareholders, thus sucking away capital that the business could have invested, or else the shareholders, who are often very middle-class, take a big hit.
If this tax increase is enacted,among those that get clobbered there will be some minority-owned small businesses.
