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Sunday, September 14, 2008

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The majority of this blog, if not all, is wrong.

http://www.excons.org/2008/09/10/debunking-a-bs-obama-mccain-comparison-talking-points-email/

http://www.excons.org/2008/08/19/obama-vs-mccain-their-tax-plans-and-the-effect-on-your-taxes/

There are people who wish this to be true but of course it's not. Lets all remember however that while a President has influence, most tax changes have to move through the congress so it's anyone's guess just what will happen.

That being said, even it you compare the promises of McCain and Obama, the post is false. This is similar to an e-mail that was circulating early this summer. You can read the details here:

http://www.snopes.com/politics/obama/taxes.asp

As to the particular details in the post:

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Assertion of the post: Obama to tax 28% on all home sales.

Obama does not say anything about home sales. Since 1997 there has been a Capital Gains tax exemption on the sale of a principal residence. For married couples that exemption is $500,000. Nowhere has Obama proposed altering or repealing this exemption.

So where does post was written before Obama settled on a number for a proposed capital gains tax rate. Obama does propose an increase in the Capital Gains tax from 15% to 20% on annual incomes of $250,000 or more for married filing jointly. This would only occur if the sale of a home exceed the exemption and then the taxes are only due on the gains above the exemption.

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Assertion of the post: Obama to tax dividends at 39.6%.

That figure of 39.6% is Obama's top tax bracket for "Ordinary Income." Currently the top two tax brackets are 33% and 35% for incomes of approximately $200,000 and $350,000+ respectively (Married filing Jointly). Obama's plan is to reinstate the 36% and 39.6% tax brackets. According to his tax plan "Obama would work with the Treasury Department to adjust the thresholds of these rates slightly to ensure that no married couple making less than $250,000 (or single making less than $200,000) was affected by these changes."

OK, so what does "Ordinary Income" have to do with "Dividend Taxes?" Not much EXCEPT, when dividend income occurs in a tax advantaged account like a 401k or IRA, you pay no taxes. No taxes, that is, until you withdraw the money in retirement. Then the income is taxed as "Ordinary Income." So, if you have a retirement fund that requires you to withdraw so much that your total income is well over $250,000 a year, then that total income may be taxed at the 36% or 39.6%, depending on where those tax brackets finally fall.

The fact that 401k and IRA distributions are taxed as ordinary income is not a change. That's the way it is now. You can view this as an inequity under anyone's tax plan, including today's laws. Take Capital Gains tax for instance. If you sell a stock or mutual fund in a non-tax advantaged account for a gain, today you'll pay a 15% tax on that capital gain. If you sell it in a tax advantaged account like a 401k or IRA, and don't remove the money from the account you'll pay nothing. Until you take that money out and then you'll pay ordinary income tax on that which could easily be higher than the 15% depending on your total income. Married filing jointly, with an annual income of $65K will have to pay 25% on those gains as they withdraw from the account.

All that being said, Obama proposes a dividend tax rate of 20% on annual incomes of $250,000 or more for married filing jointly.

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Assertion of the post: Obama will increase taxes for people making as little as $30K for a single person or $60K for people married and filing jointly.

I believe the table presented in the post would be true if Obama was in favor of reversing ALL of the tax cuts enacted in 2001 and 2003. Obama's tax plan clearly states that it is only in favor of "Repealing a portion of the Bush tax cuts for families over $250,000..." Since the table in the post stops at $125K, it's completely inaccurate. (Although the table presented does say "reversion to pre-Bush tax cuts", that is NOT what Obama want's to do.)

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Assertion of the post: Obama to restore inheritance tax.

Obama's plan calls for the repeal or all estate taxes except on estates over $7 million per couple. For those Obama will retain the 45% tax rate.

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If you really want to know what Obama wants to do with taxes, you can read his comprehensive plan. Don't let the "Comprehensive" word stop you, it's only 5 pages and some footnotes. You'll find a link to the PDF at the bottom of this page:
http://www.barackobama.com/taxes/

I only trust Snopes when it comes to debunking urban legends. When it comes to political *anything*, they tend to lean decidedly left, so I take what I find there with about a six-pound bag of salt.

Sorry, but the post stands.

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