Don't Mess With Taxes

Barack Obama has tweaked his tax plan in connection with expanded Social Security payroll tax collection and higher capital gains tax.

Jason Furman and Austan Goolsbee, Obama's economic policy director and senior economic adviser, respectively, elaborated on the revised proposal last week on the Wall Street Journal op-ed page.

Obama still supports changes to both areas, but just not as much as he originally did.

Now he's calling for a 20 percent tax on capital gains and certain dividend income, which currently is 15 percent, for individuals making more than $200,000 and families making more than $250,000.

Previous comments during the campaign seemed to indicate he wouldn't be averse to bumping up the capital gains rate above the 20 percent mark.

As for payroll taxes, Obama now wants to levy payroll taxes on earnings above $250,000 at a rate between 2 percent and 4 percent. We wouldn't see that increase, however, for at least a decade.

Back in September 2007, Obama originally indicated support for applying the existing Social Security tax to all earnings, not just those below a certain income cut-off amount. You can read my earlier blog on that proposal here.

Change is inevitable: It's not unusual for any of us, presidential candidate or regular Joe or Joan, to change our minds. And I respect folks who, when given new data, consider it and adjust their positions as they see appropriate.

What's that assessment of concrete mindsets from Ralph Waldo Emerson? "A foolish consistency is the hobgoblin of little minds … ."

It's a tough political line to walk, trying to come up with money to run a government facing even more debt while the economy is struggling and voters balk at any talk of taxes. So I'm not surprised by Obama softening somewhat his earlier tax talk.

But, as that other old saying goes, I didn't just fall off the turnip truck. So I definitely understand why some folks see these adjustments as politically motivated to try to placate voters who might be affected by the changes. Or, more likely, to lessen the impact of the GOP characterizations of Obama as a tax-raising Democrat.

Whatever the motivation, we voters must look at both the Obama and John McCain tax (and other) proposals themselves, and not simply rely on campaign propaganda from either side.

To that end, you can check out the Tax Policy Canter's side-by-side comparison of the Obama and McCain proposals. It's not updated yet to reflect Obama's changes this week, but those folks are good, so that new info should show up soon.

And here are some analyses from the blogosphere of the revised new Obama tax proposals:

• Obama Pulls Back on Social Security Plan from the New York Time's politics blog The Caucus
• Obama's Empty Social Security Fix from Tax Vox, the blog of the Tax Policy Center
• With Polls Close, Obama Blinks on Taxes from Capital Commerce, James Pethokoukis' blog at U.S. News & World Report   
• Obama's tax plan: what could be clearer? from Clive Crook at The Atlantic
• The Obama Tax Plan (or How to Look Good at the Dance) from EconomistMom.com

TaxProf also pulled together a collection of other comments on the Obama plan. Click here for those.