How Can a Man Who Doesn't Even Know How Many Degrees He Holds Be Expected to Understand the Tax Code?

The St. Louis Post-Dispatch reports that Joe Biden committed a common tax error while criticizing John McCain's tax plan. Biden used average health care costs of $12,000 per year to give an example of the effects of the McCain proposal of a $5,000 credit.

According to the Post-Dispatch, Biden said $7,000 would still be taxable. This indicates Biden is confusing tax credits with tax deductions. A credit reduces a tax liability dollar for dollar. A deduction reduces taxable income before the tax rate is applied.

A taxpayer in the 25% bracket would incur tax of $3,000 on $12,000 of taxable income. The $5,000 would be applied directly to the tax liability. Biden, apparently, would incorrectly deduct $5,000 from $12,000 income and then apply the tax rate. Fortunately for Biden, Delaware has the highest per capita rate of CPA's in the United States.

As bad as that is, it gets worse. It seems that Biden believes that McCain is making economic sense and that is bad for America! (Video is here at 5:25).

Obama-Biden's new slogan: Vote for us, the party that believes Economic Sense is Bad for America!

Read My Lips: Disagreeing Politicians Aren't Lying Politicians

There is a kerfuffle brewing in the political world concerning proposed tax policies of the Presidential candidates.

In Obama's acceptance speech, he promised to give tax cuts to 95% of working people. McCain says that President Obama will raise everyone's taxes.

Now it seems commentators are calling McCain a liar. While it is difficult to defend any politician when called a liar, it seems illogical in this instance to use the moniker.

For McCain to be a liar, he would have to say Obama will raise taxes while he knows not only that Obama promises to cut taxes but will also be able to cut taxes.

Twenty years ago, a Presidential candidate asked Americans to read his lips. He promised no new taxes in his acceptance speech. By the logic used today, anyone who said the lip-reading President would raise taxes would be a liar. During his administration, however, George H.W. Bush did allow for tax increases.

So it is far too soon to know if McCain is a liar or a prophet.

It's As If I Don't Exist

I have either been Terminated or Totally Recalled!

In a posting that discusses taxation of 501(c)4 organizations (civic organizations devoted to charitable, educational or recreational purposes), Linda Beale goes off on a tangent. I traded posts several times on it and had an entry that remained for about 12 hours. Then, all of a sudden my final post disappeared. I don't believe I was rude or obnoxious but I have all of the entries saved. You can read all entries but my final one here.

Here is my final response:

Linda

I am not a ‘fan’ of smear campaigns, but I am rather fanatical about the 1st amendment. From this post and others similar in nature, I am inclined to believe that you wish these people weren’t allowed to say what they have to say and that the tax code may be a viable way in which to shut them up. Otherwise, in issues like this you may balance your opinion with equal criticism of PAC groups such as Brave New PAC which disputes much of John McCain’s POW experience. As an aside, I believe Philip Butler, the man who served with McCain and used in the ad poses a serious problem for Obama. Whether true or not, I believe many Americans will find Butler’s ad in poor taste, but I would rather Butler have the freedom to state his claims.

I don’t object to your word choice. I only mentioned it because language such as ‘anti-progressive’ ‘right-wing’ ‘Bush regime’ ‘Rovian’ ‘swift boat’ are typically used by people who haven’t exercised a ‘careful weighing of the facts’. Yet you write of William Ayers of the Weatherman as if that organization is your garden variety civic organization. You also stress ‘long ago’ in an apparent attempt to minimize the impact of the Weatherman though from Ayers own statements he is unrepentant and believes the group didn’t go ‘far enough’. You then feel it necessary to state that Obama has in no way indicated that he thinks violent action against the US is appropriate. That’s a relief. The terminology you chose leads me to believe that you are left of center, have long ago decided to back the Democratic nominee and will be critical of any tactics from those who oppose that nominee. All of that is perfectly acceptable, but again doesn’t ‘reflect a careful weighing of the facts’.

Specifically as for Swift Boat Veterans for Truth and others similar the IRS issues will always be of facts and circumstances. It could be argued that the Swift Boat Vets didn’t intend to engineer an election but to directly refute John Kerry’s 1971 testimony in which he said, “they had personally raped, cut off ears, cut off heads, tape wires from portable telephones to human genitals and turned up the power, cut off limbs, blown up bodies, randomly shot at civilians, razed villages in fashion reminiscent of Genghis Khan, shot cattle and dogs for fun, poisoned food stocks, and generally ravaged the country side of South Vietnam”. It certainly seems Kerry may have ‘smeared’ them 33 years prior and they were only responding in a manner to educate people that they did not in fact commit the crimes of which Kerry accused them.

Once again, I appreciate your blog and find your non-political posts informative (I actually find your political posts both entertaining and informative, though not for the reasons you intend). I am, however, inclined to believe you have long ago made up your mind about this Presidential race as well as many other issues. Rather than drawing a conclusion from the information present, you seek to find information to support that conclusion.

Regards – Dave.

I don't know. It doesn't seem to be out of line. Here is a list of 501(c)4 organizations that have been accused of engaging in political campaigns on behalf of or in opposition to candidates for public office that Ms. Beale chose not to mention: MoveOn.org, Democratic Leadership Council, Brave New PAC, The Media Fund, America Coming Together and America Votes.

Tax Credits are Not Tax Cuts

95% of working families can expect a tax cut under Presidential candidate Barack Obama's tax plan. Obama has not been very specific about the mechanics.

In 2006, taxpayers in the 5% tax rate paid on average of $362 in taxes for the year. People in the 10% bracket paid on average of $519. These figures were derived from IRS statistics.

If he cut these rates to zero, it would only save this group of taxpayers $362 and $519, respectively. My guess is instead of a cut in the tax rate, he will propose targeted tax credits. Which means Obama will really be advocating spending increases.

Form 1040, page 2, shows a series of non-refundable (lines 47-55) and refundable (lines 66a and 68) credits. These include child care, elderly, education, energy credits and others. A simplified explanation of tax calculation would be to sum your income, subtract your exemptions and deductions to arrive at taxable income. Apply the tax rate schedule to your taxable income to calculate your tax liability.

Tax liability is your total amount of tax. To determine, your refund or tax due subtract tax credits and taxes already paid (typically through withholding). Every dollar of tax credit reduces your tax due be a dollar.

If, however, instead of subtracting from taxes owed your amount of credits, you paid the full amount of taxes owed and at another time from a different bureaucratic agency (Department of Earned Income Credit?) received a check for the amount of the credit everyone would recognize it for what it is....welfare....disguised as a tax cut!

Reasonble people could certainly argue the benefit of any and all of these credits. However, these can't be argued to be tax cuts but increases in federal spending. And my guess is Barack Obama's plan won't result in any real tax cuts.

I Don't Know Tax Law, I Just Write It.

Charlie Rangel, chairman of the House Ways & Means Committee, the committee that has the responsibility of writing tax laws, has failed to report $75,000 in income.

The New York Times reports that this poses a political embarrassment for Rangel. I'll say.

Maybe the Democratic Messiah can spin this into a campaign slogan. "Vote for us. We'll cut 95% of people's taxes and the rest can do like us and not report your income!"

Increases in Tax Revenues Aren't Tax Increases

People on a search to find something to destroy Vice Presidential nominee Sarah Palin are grasping at straws when they surmise that she must be a tax & spend bureaucrat such as this:

"Sarah campaigned in Wasilla as a “fiscal conservative”. During her 6 years as Mayor, she increased general government expenditures by over 33%. During those same 6 years the amount of taxes collected by the City increased by 38%."

Quote by Alaskan resident Anne Kilkenny

What Kilkenny fails to mention is that Wasilla grew from a population of 4,028 to 7,025 estimated for 2003 (Alaskan Department of Commerce and Economic Development). That’s a population increase of 74%. And the city only increased collected taxes by 38% and spending only increased by 33%. That means that each resident saw their tax burden cut drastically. The Democrats should have nominated someone with this kind of experience.

I guess this proves Gov. Palin correct; Community Organizers such as Anne Kilkenny truly don’t have any responsibilities, especially to the truth!

Tax Cuts for All!

I will, listen now, cut taxes -- cut taxes -- for 95 percent of all working families. - Barack Obama's Acceptance Speech.

No specifics were given on how this would work. But 95% of working families means everyone earning about $700,000 and less will receive a tax cut according to Internal Revenue Service statistics.

I think Obama really thinks he is the tax cut Messiah.