Man, it’s wonky goodness like this that makes me support Barack:
Democratic presidential candidate Barack Obama is proposing more than $80 billion in annual tax relief for workers and seniors funded by an increase on wealthier investors.
Obama wants to give 150 million working Americans a $500 tax credit, expand relief for homeowners, eliminate income taxes for seniors making less than $50,000 and simplify tax returns so millions of Americans can file in less than five minutes, according to a summary document provided by his campaign.
Obama’s campaign said he would pay for his proposals by closing corporate tax loopholes, fighting international tax havens and raising the top rate on capital gains and dividends.
For one thing, I love the automatic tax filing proposal. It’s so much more efficient than the current system in so many ways. It was first formulated by Austan Goolsbee for the Brookings Institution’s Hamilton project; Goolsbee has since become Obama’s main economic adviser, and so it’s good to see Obama embracing one of his best ideas.
But more importantly, the entire tax cut is designed to ameliorate a problem progressives, particularly online, have been harping on for a while, namely that wages are being taxed too much and capital is being taxed too little. By cutting taxes on wages through the $500 tax credit, which is intended to offset payroll taxes on the first $8,100 a worker earn, and paying for it by raising taxes on corporations, capital gains, and dividends, Obama’s plan would implement a direct tax shift away from wages and onto capital. The beauty of the plan is that it does this while improving one’s incentive to save. Higher taxes on capital generally discourage saving, but by eliminating taxes on seniors living on less than $50,0000 (for the most part, this means retirees living off of savings interest or annuities), Obama encourages workers to save for retirement, as under his plan the interest on that savings could be used, for the most part, tax-free.
In short, it’s a conceptually elegant proposal with a lot of obvious political appeal. That is to say, it’s what I’ve come to expect from Obama.