Obama's tax on the wealthy, corporations could harm working-class Americans

Over the past year, presidential hopeful Barack Obama has emphasized the need for economic and tax reform, both of which-he claims-could lead to a more just and fair redistribution of wealth in the U.S.

Obama's tax increases on the "wealthy" have been at the forefront of his economic plan, but the question remains whether or not these increases will penalize more than just the rich.

Obama says that his tax increases won't affect people who make less than $250,000 a year, but a quick analysis of his taxation plan finds this to be false.

If Obama is elected this November and fully implements this plan (a big if, considering Congress), it won't raise income taxes for most people. However, he does want to significantly raise the capital gains tax and taxes on corporations.

Corporations sound like big, evil entities, but many of them are, in fact, very small. Many small family-run businesses today are corporations; for example, the Imperial Agency and Modern Dental Associates near the University Press on City Avenue are both incorporated.

These businesses do this because, in our legislative society, it allows them to have limited liability. If something happens and the company is sued, they can only lose the assets of the corporation. If they weren't incorporated and were operating under a partnership, for instance, they could lose their business, house, retirement savings, etc.

By raising taxes on 'corporations', Obama will, in effect, raise taxes on some working class people. If you consider the breakdown of large corporations, this fact becomes even more obvious. Those "evil" corporations employ millions of people. Many corporations need investors and are responsible to those investors for creating profits. If you raise taxes on corporations, you will obviously lower their net income.

This loss of income will eventually trickle down to the investors, who will, in turn, get less money through dividends; their investment, therefore, becomes less profitable and their willingness to invest at home will potentially decrease. Perhaps instead of looking into domestic corporations, they will choose to invest in Europe, China, or India where the likelihood of profits is higher.

Americans need to realize that it's not just greedy corporations that take money; taxing them also has adverse effects on the roughly 80 percent of Americans who own stocks, either directly or indirectly through retirement plans and 401Ks.

Take, for example, what happens when senior citizens, who bought their houses for $100,000 several years ago, sell it for $400,000 to move into a retirement home. They will have to pay capital gains tax on the difference between the buying and selling price.

When a blue-collar union worker sells the company stock he has been getting for years, he pays capital gains tax on it as well.

Currently, in 2008, the tax rate for long-term investments is 15 percent (zero percent if you make about $43,000 a year or less), and an individual's normal tax rate for short-term investments.

There is, however, a catch: the long-term provisions are set to expire in 2010. This means, for example, that the tax rate on long term investments will go from 15 percent to 25 percent for someone making $50,000 a year. An individual making $40,000 a year will go from zero percent to 15 percent, while someone making $200,000 a year will go from 15 percent to 33 percent.

Obama has pledged to reverse the Bush tax cuts and raise investment taxes, including the ones listed above, while McCain has said he will make the tax cuts permanent and continue to include the low, long-term rates for capital gains taxes.

It looks like Obama is not exactly truthful about his 'tax plan' when he says it won't affect taxpayers who make less than $250,000 annually.

Several economists even predict that the government would actually collect less money if they raise capital gains tax because of decreased investments.

This happened in the '80s when the rate was increased by Reagan. Obama even conceded once that cutting taxes could increase revenues, but said he'd raise them anyway for the sake of "fairness."

The other consequences of raising the tax rate, which possibly include the government tax revenue decreasing and a stock market slide, don't seem to deter him from raising the capital gains tax.

A section on Obama's Web site, called the 'Remarks of Senator Barack Obama: Tax Fairness for the Middle Class,' talks about his reasoning for this, as well as some of the other economic problems Americans face today.

After talking about rising costs of healthcare and gasoline, he made an amazingly incorrect statement. He said, "It's happening because we've gone too far from being a country where we're all in this together, to a country where everyone's on their own."

I stopped and thought about this, and wondered when this country has ever been one where everyone is "together" economically.

My grandparents came to America in 1951 with two kids and were given $20-about $160 today-to get by in their new environment. There were no concepts of socialized healthcare, and they weren't in "all of this together."

My grandfather's first job paid 75 cents an hour (about $5.90 in 2007 dollars, which is far below the current federal minimum wage). They scrimped, saved and worked hard in order to survive.

In looking throughout recent U.S. history, I couldn't think of any time except the worst parts of the Great Depression when we were "all in this together" economically. Even during World War II, there was war profiteering. This country has always been about independence, this competition is what has made this country strong.

Obama goes on further to talk about income inequality and how the Bush tax cuts gave back twice as much money to the top one percent than the middle class.

But if you look at the numbers, it's not hard to realize why those people want some money back. According to the Congressional Budget Office, in 2005, the top one percent had an effective tax rate of 31.2 percent and paid for 27 percent of the federal budget.

That's right: taxes on just one percent of the population provides for more than a quarter of the overall tax revenue. The top 20 percent-people making more than about $230,000 a year-pay about 70 percent of the tax revenue anually.

Any way you look at it, Obama wants to raise taxes in a time when the economy has the very real possibility of faltering. He also wants to increase the size of the government that is already restrictive and burdening to its economy and people.

Although more Americans say they are confident in Obama's economic plan than McCain's, there are serious problems that need to be addressed in Obama's approach to U.S. corporations and taxpayers.