Obama Tax Plan Show Dramatic Redistribution
July 8, 2008 · Filed under: News
According to a newÂ Tax Foundation analysis, Senator Obama’s tax plan is a dramatic redistribution of the nation’s tax burden.
In Tax Foundation Fiscal Fact, No. 132, Tax Foundation president Scott Hodge uses revenue estimates from the Tax Policy Center to show that Obama’s plan would greatly accelerate the decades-long trend toward a federal government that depends for tax revenue almost exclusively on a few high-income people. Â This contrasts starkly with the McCain plan, according to Hodge, which would give every taxpayer a cut and leave the current tax burden distribution approximately where it is. “Under the Obama plan for 2009,” explains Hodge, “more than $131 billion would be redistributed from the top 1 percent of taxpayers to all other taxpayers.”Â Â Â
I thought the closing comments were interesting.
While many Americans may cheer this outcome as just or equitable, this sort of direct redistribution raises some important questions that should be part of a larger national discussion:
- What is the long-term effect on the economy of so few households shouldering such a large share of the tax burden?
- What are the consequences for our democratic system when a majority of Americans are disconnected from the full cost of government? Will that majority demand more from the government because they bear little of the cost?
- Should the tax system be used as a means of redistributing income or simply as a neutral mechanism for raising money for government services? Can a tax system premised on redistribution also be compatible with economic growth?
- The Obama plan assumes little behavioral change from such a large tax hike on high-income workers. Is this realistic or will the higher rates encourage tax minimization strategies and reduced work effort, which will lead to lower tax revenues?
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