Organizing for America | Martha's Blog: Obama's tax plan would help middle class, pinch the rich

Obama's tax plan would help middle class, pinch the rich

By m2violin - Sep 19th, 2007 at 5:39 pm EDT

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From today's Chicago Tribune:

Obama's tax plan would help middle class, pinch the richBy Mike Dorning | Washington Bureau
8:12 PM CDT, September 18, 2007 WASHINGTON - Democratic presidential candidate Barack Obama on Tuesday proposed a tax cut of more than $80 billion for low- and middle-income workers and retirees funded by higher taxes on investors and some businesses.

Like other major Democratic candidates, the Illinois senator already has said he would eliminate the portion of the Bush administration tax cuts that benefits families earning more than $250,000 per year, so his tax plan would amount to a significant shift of the tax burden away from low- and middle-income Americans toward the more affluent.

Obama presented the tax plan in a speech to the Tax Policy Center, a non-partisan research institute, a day after going to the NASDAQ stock exchange in New York to criticize the values of Wall Street. The tax proposals continue a populist economic approach."We need a tax code that's fair—a tax code that rewards work and advances opportunity," Obama said.

The centerpiece of the tax proposal is a direct "Making Work Pay" credit that would cut $500 from the tax bills of most low- and middle-income wage earners. Obama also would exempt senior citizens making less than $50,000 from income taxes and create a mortgage interest credit to lower the tax bills of less affluent homeowners by an average of $500, according to the campaign.

The new work tax credit would give workers a dollar-for-dollar tax credit up to $500 for Social Security taxes deducted from their wages, a level that workers rapidly reach. The tax credit would phase out for people earning "about $150,000 to $200,000" per year, according to a campaign adviser who briefed reporters on the tax plan on condition of anonymity.

The new mortgage tax credit is designed to expand the tax benefits from home ownership to include lower-income people who do not itemize their taxes. About two-thirds of Americans currently do not itemize their taxes, the campaign said.

Homeowners would be allowed a tax credit of 10 percent of interest paid even if they did not itemize their taxes. Homeowners who itemized their tax returns could still deduct all of their mortgage interest.

In a bid to simplify the process of filing taxes, Obama said he would give 40 million Americans with uncomplicated finances the option of simply verifying and sending back a pre-prepared tax return filled out by the Internal Revenue Service. Because employers and banks must report wages and interest income to the IRS, the tax agency can compute the tax bills for many Americans without additional input.

The senator said that would reduce time spent on tax returns to five minutes and save more than $2 billion in tax preparation fees and more than 200 million hours of work, as well as "an incalculable amount of headache and heartburn."

Obama said he would pay for the tax cuts by "shutting down corporate loopholes and tax havens," eliminating a tax break for hedge fund managers and raising the tax rate charged on capital gains and corporate dividends.

Investment income from capital gains and corporate dividends is currently taxed at a lower rate than workers' income from wages. The maximum tax rate for capital gains and dividends, currently set at 15 percent, could rise to "as high as" 28 percent, although the campaign has not yet determined the exact rate they would propose, according to the campaign adviser who briefed reporters.

Obama said he would "penalize companies and individuals" who do business in such "tax haven" countries as Andorra and Liechtenstein that do not follow international standards for sharing financial information.

The campaign adviser said Obama had not yet determined all of the loopholes he would eliminate but said they would include virtually all tax breaks for the oil and gas industry. Obama also would change the law to make it easier for the IRS to challenge tax shelters that have no substantial economic purpose, the adviser said.
Visit the Chicago Tribune website at www.chicagotribune.com

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