...is a cut that's not really a cut. In this excellent analysis of what The O has (and hasn't) said about tax cuts, Ned Barnett at AmericanThinker.com posits that The O's plan, if enacted, actually provides for four tax increases for We the People who have the poor fortune to earn less than $250K per year (otherwise known as the Arbitrary Richness Threshold, or ART). At the risk of oversimplifying Barnett's work (as a small business owner, he brings a unique and relevant perspective to the issue), here are the four tax increases he identifies:
The O has:
1. Promised to allow the Bush tax cuts to expire. He parses his words carefully and explains that allowing the tax cuts to expire isn't the same as a tax increase, irrespective of the fact that the tax rates to which we would revert are higher. I'm not sure my wallet and my bank account are sophisticated enough to appreciate the difference between the two; all I know is that, at my family's income level, we will pay an additional $3,000+ in taxes, and we don't make anywhere the ART.
2. Proposed lifting the current cap on Social Security payroll taxes, which currently limits the tax to 12.4% on the first $94,700 of an unmarried individual's earnings. Half of this tax is paid by employers and half by employees. As employers' costs in this area increase, they will react by either (a) reducing payroll, or (b) passing the cost along to consumers.
3. Proposed increasing the capital gains tax from 15% to 20%, a full 1/3 increase. He continues to pitch this increase as a tax on the "fat cats," but the reality is that many people who earn less than $250K have personal portfolios that are subject to capital gains taxes. Obviously, there are no capital gains taxes on 401k accounts, IRAs, or pension plans, but woe to those who dare to sell stock from their own personal portfolio: The O's plan does not consider -- or care -- whether you make more or less than the ART.
4. Promised to raise taxes on businesses. As with the proposed increase in payroll taxes, businesses will not realize these increased taxes without passing the cost along to consumers in one form or another. Increasing the cost of doing business is, in essence, a de facto tax increase that will be realized by We the People.
The O has promised that he won't actively raise taxes on the bottom 95% of earners (many of whom don't pay any taxes to begin with), but the reality is that his plan passively raises taxes on 100% of taxpayers. Even in this brave new postmodern world, words still mean something. Just ask Bush pere: We read his lips, too.