OBAMA THE TAXER - October 11, 2008

The political environment during this election

cycle has always favored the Democrats, with a discontented populace having long soured on the Bush Administration over the war in Iraq,

the response to Hurricane Katrina, and a

stagnated economy.  If the race is lost to Republicans – it was the Democrat’s to lose. Republicans have been playing defense against both the President and Democrats for the past

two years, but the McCain campaign has picked

up the wrong playbook and should re-examine

its strategy. Senator McCain should be attacking Senator Obama’s liberal governing philosophy

that envisions government as the solution to all social ills, rather than the character of his opponent.

Looking to the past for insight, President Reagan once said, “Government is not the solution to our problem; government is the problem.” Ronald Reagan knew back in 1981 what most Americans hold true to this day – we as a people operate better when government gets out of the way.  A new Rasmussen Reports national telephone survey conducted on October 3rd found that 59% of voters agree with Reagan, and just 28% disagree. The lasting resonance of Reagan’s quote was recently noted in a column by Arianna Huffington who wrote “Twenty-seven years later, in the midst of the worst economic crisis since the Great Depression, and seven-plus years into the reign of Bush and Cheney, Reagan's anti-government battle cry should be on trial. But, stunningly, it is not.”

McCain should focus his efforts on Obama’s policy prescriptions that significantly expand the reach of government and their implications for the long-term economy. During the financial meltdown on Wall Street Senator McCain ceded control of economic discussions to his opponent and has seen a downturn in his polling numbers as a result.  By refocusing on the economy, McCain can attack the anti-growth implications of Obama’s calls for higher taxes and expanded government. 

An Obama Administration would mean higher income taxes, higher Social Security taxes, higher investment taxes, higher corporate taxes, massive new domestic spending, and a healthcare plan that perhaps could be the next step to a full-scale, socialized health care system. In today’s current recessionary environment, this push for additional tax burdens on businesses and individuals will stifle job creation.  Average Americans understand this – according to Rasmussen Reports, an incredible 60% of Americans believe that tax hikes are bad for the economy. McCain should echo the voices of millions of Americans who oppose such a strategy to improve our economic outlook.

Senator Obama has proposed to raise capital gains taxes, "I think that we can have a capital gains rate that is higher than 15 percent." (CNBC's "Closing Bell," 3/27/08) What McCain isn’t saying is that through this tax increase Senator Obama is proposing to raise taxes on more than ten million seniors. Seniors are more reliant on gains from investments and capital gains and depend on a fixed income to live.

Senator Obama has proposed lifting the earnings cap on payroll taxes, “I think that lifting the cap is probably going to be the best option." (Sen. Barack Obama, Democrat Presidential Candidates Debate, Hanover, NH, 9/26/07). This action would prove a clear disincentive for employers to create more jobs and would immediately pull money out of employees’ pocketbooks. Small businesses would be particularly hard hit by an increase in payroll taxes. In fact, about one-third of the workers affected by raising the cap would be small business owners (Michael Tanner, "Keep The Cap," The Cato Institute, www.cato.org, 6/8/05). Beyond this, the self-employed would be subject to a double hit since they pay both the employee and employer portion of the payroll tax. (Editorial, "Caps Off For Obama," Investor's Business Daily, 9/25/07)

Senator Obama has proposed to roll back tax cuts on Americans earning over $250,000. At first blush this sounds positive to the majority of middle-class income earners who interpret this as a good change, one that will only impact the rich. However, a significant percentage of taxpayers that fall into the top income tax bracket are also the small businesses that are our country’s entrepreneurs. They create jobs, spur innovation and economic growth – and Senator Obama wants to tax them more during an economic recession. Specifically, 28 percent of all taxpayers in the 'richest' fifth report business income. At even higher income levels, the percentage of taxpayers with business income increases. Of those taxpayers exposed to the highest individual tax rate (39.6 percent in 1999), 62 percent have business income." (Scott A. Hodge, "Own A Business? You May Be Rich: Two-Thirds Of Taxpayers Hit By Highest Tax Rate Have Business Income," www.taxfoundation.org, 5/5/03)  

Senator Obama has proposed a healthcare plan that calls on employers that don’t provide insurance to forfeit a percentage of their payroll. Offering good health benefits is an attraction for workers seeking employment. Hence, businesses that want to attract the best workers and can offer good benefits will – it is to their own advantage. Harvard economist Amitabh Chandra said that this new employer mandate could, “Force employers to eliminate jobs, raise prices, or move jobs to foreign countries.” He went on to explain, “The populist view is this will only come out of profits, but, ultimately, the money will come out of wages. For some people, it can't come out of wages, some low-wage jobs simply can't support the cost of health insurance, now estimated at more than $12,000 a year for family coverage. For this reason, a mandate would force employers to eliminate jobs, raise prices or move jobs to foreign countries."

While hitting Obama’s policy proposals, McCain can point to a strategy that will stop the nation’s financial hemorrhaging and lay the foundations for renewed prosperity.  A McCain Administration would eliminate the alternative minimum tax, raise the personal exemption for each dependent from $3,500 to $7,000, and cut the estate tax rate to 15 percent and exempt estates under $10 million. He would also cut the federal corporate tax rate to 25 percent from 35 percent and allow corporations to immediately deduct the costs of new equipment and technology. He plans to establish a permanent tax credit for companies that is equal to 10 percent of wages spent on research and development. And finally, he would require a three-fifths vote in Congress to increase taxes.

These changes will help spur the economy. They will help middle-class Americans keep their jobs, allow small businesses to thrive and grow, and finally get government off the backs of the people where it doesn’t belong. On fiscal policies, another president once embraced the same strategies as Barack Obama during a time of economic slowdown and financial market volatility: “Herbert Hoover raised taxes on high earners sharply and, ignoring a letter signed by 1,000 economists, signed the Smoot-Hawley tariff in 1930. The results were not pretty. Until now, his example has not commended itself to Democrats. One wonders whether voters will agree that tax increases will stimulate the economy." (Michael Barone, Op-Ed, "Uncle Sam Pays? Sure, Whatever," U.S. News & World Report, 4/21/08)

It is time that Senator McCain reminded the American people of these facts and reiterate the words of another President at another time of economic turmoil. “In this present crisis, government is not the solution to our problem; government is the problem. From time to time we've been tempted to believe that society has become too complex to be managed by self-rule, that government by an elite group is superior to government for, by, and of the people. Well, if no one among us is capable of governing himself, then who among us has the capacity to govern someone else? All of us together, in and out of government, must bear the burden. The solutions we seek must be equitable, with no one group singled out to pay a higher price.” President Ronald Reagan 1981.

Stephanie Kimball

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Author of the article holds B.A. degree in Political Science from the University of California Davis. For the last 9 years she has been working as a Legislative Director for several Republican Assembly members in the State of California.
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