The main changes in the plan with respect to income (ignoring capital gains for now) are
- Highest marginal tax rate increases from 35% to 39%,
- Social security taxes apply to anything over $250K.
I wonder if there's a psychological effect when somebody realizes that 7 months of the year are spent working just to pay the government.
This includes only the direct effects of the taxes on high wage owners. It's not clear if the companies paying these earners will have to pay an additional 7.5% also on the wages over $250K. If so, these lawyers and doctors may see their wages decreased or more likely for the costs to be passed on to the customers.
I wonder if Obama will really be able to pass this tax plan. He will be taking a lot of money away from his largest contributors. Then again, maybe these contributors making it back on the flip side. Univeral healthcare would be a huge handout to the medical industry. Increasing the regulatory framework that is likely under a Democratically controlled Federal government will mean huge new business for lawyers. Tax laywers are likely to see a surge in their services as higher rates driver incent wealthy people to find more ways to protect their money from the government. And a big bailout of deliquent homeowners from an Obama plan would be an enormous gift to the banking industry. And could Obama really simplify the tax code by sending the majority of Americans a tax bill instead of requiring them to buy Turbo Tax or go to H&R Block? I learned recently that Intuit and other tax lawyers spend ridiculous amounts of money lobbying the Federal government to keep the tax code complex to maintain their businesses. Is Obama going to take away their customers?
If this plan does pass, I predict it will result in a bigger government spending more money on things we don't need. For example, Obama wants to increase the size of the military and add more subsidies for ethanol. The main outcome will be increased price inflation which will mostly affect the people Obama most wants to help. It will result in loss of jobs and economic growth. The fastest growing economies are outside the United States where taxes are much lower. We're already seeing a problem retaining talent in this country. University students from China and India studying here used to stay here and take jobs. We're now seeing them return to their countries after they get their degrees. I think this will become the norm.