Does the American middle class shoulder the majority of the tax burden? Well, they certainly shoulder the majority of IRS tax debt. The majority of people that I took collection actions against were in the $30,000-$100,000 income range. The most common segment of the middle class that was targeted: small business owners.
This isn't to say that Americans living close to or below the poverty level don't have tax debt. The wealthy aren't exempt from racking up massive tax debts... and let me tell you, when we got to seize the assets of the super wealthy, it was like Christmas.
I've discussed aspects of the Fair Tax championed by Governor Huckabee in my article, "The Hitman takes Aim at the Fair Tax."
Right now, however, I want to discuss a tax plan from the other side of the aisle, and that's the tax plan proposed by Senator Obama.
Senator Obama has stated that he intends to provide an 80 billion dollar tax cut to the middle class and poor. But how does he intend to do this, and would it work?
Senator Obama has proposed stiffer income taxes for the wealthiest Americans, but candidates have promised that before without any visible change. But let's look at his plan anyway.
One of the major obstacles in increasing income tax for the wealthiest Americans is the income tax cap. Basically, the maximum amount of income that can be taxed is $92,500, and any income over that isn't taxed. Senator Obama has proposed lifting that tax cap.
He has also stated that he will increase tax rates on unearned income such as capital gains, dividends, and profits of hedge funds. Currently, those are taxed about 15%. Senator Obama proposes an increase to 20-28%.
He also plans to give a $500 tax credit per person that would offset the first $8,100 of payroll taxes.
He claims he would crack down on off-shore tax havens for multinational corporations.
But would all of this aid the middle class? Well, the Hitman has some questions that are rattling around my head.
First of all, if corporations are more heavily taxed, especially the capital gains and dividends of their share holders, there may be layoffs of workers causing undue hardship to the middle class.
The elimination of the tax cap certainly would cause the rich to pay more, but it also can hurt the small business person who may have a gross income of $100,000-$200,000. While this does seem like a large amount of income, small businesses have to put most of that money back into operating costs, and increased taxes on their income could seriously hurt their business.
With the strong possibilities of layoffs for the average American, and an increased burden for the small business owner, the tax plan that looks and sounds very good could widen the gap between the very rich and the very poor.
As the race for president heats up, the IRS-Hitman will continue to tackle tax proposals from both sides of the political aisle.
Labels: Tax News