Taxes are typically very bad for a slow economy and particularly during a recession. However, we are fighting to keep from having a depression. The way they are fighting it is to borrow massive amounts of money and print even more. It is unsustainable. The government has no choice but to try to squeeze some more money out of where they can find it. They can't dip into the "middle class" unless they truly would like to see us in a depression. So that leaves the politically correct, and in this case, the only fiscally responsible thing they can do. Tax the "rich" and try to cut where they can. Seems like getting out of the wars in the Middle East would be a great place to start saving money.

I bet the IRS is going to be incredibly rigorous over the next 3-5 years to recover every penny they can find. Could be very scary. Abolishing the IRS and moving to the Fair Tax would probably save Americans billions and countless hours of pain.

http://www.fairtax.org/

I like the idea of a fair tax. I also think the government should be doing what it can to give tax incentives to those companies who are based in America, and are hiring. It's going to take companies investing in people that will get us out of this, and not the government handing people money.

I like the idea of a fair tax as well, it works well in many European countries. I'm happy with the plan and it is what he ran on so it isn't surprising.

I see nothing in that plan that isn't typical tax and spend liberal. If you took the plan and ignored the bailout completely, then yes, it would be tax and save. But we just blew 800 billion! And now he's raising taxes. Hence, tax and spend. This plan may have won the election because it played on people's fears of those "wealthy" people and how they are just swimming in money! Gotta love that class warfare.

The fair tax is the right solution.

Side note: Does anyone know of a time where raising taxes helped an ailing economy?

I'm honetsly asking.

tax and don't spend?? HA
a trillion here, a trillion there.....
Spend on what you want. Universal Healthcare and welfare for all. And then say you don't spend.
It is no better than Bush not including the war spending in the annual budget. He is hiding his spending in the name of stimulus and recovery for the US

I like this plan.
"it played on people's fears of those "wealthy" people and how they are just swimming in money!" Is that what you really think? LOL!

"Side note: Does anyone know of a time where raising taxes helped an ailing economy?"

There has never been a time when raising taxes has helped the economy in a capitalistic society. Raising taxes on businesses hurts the economy, because businesses go to where they can make more money. Now that we are in a global market, we are seeing this ever increasing trend.

As I'm reading this plan Obama I'm seeing that he isn't raising taxes on businesses. Where do you see that this is the case?

*plan by Obama

What's worse: tax and spend or borrow and spend?

they both suck!

Bush spent all our money and that's why we're in this mess in the first place

Lets keep in mind that the wealthiest 1% of Americans own 34% of the stock. If you raise their taxes and capital gains, guess where they AREN'T going to put their money? The stock market.

The top 20% of American earners own 90% of the stock in this country.

Raise their taxes and watch them cut back like everyone else does. It will be disastrous.

maybe increasing the tax on capital gains will encourage the rich to hold on to their stock longer to avoid the tax?

mydia - Interesting thought, but history has shown us that an increase in capital gains tax ALWAYS, 100% of the time leads to people pulling back in investing. Its actually a pretty bipartisan recognized fact.

And actually because of that (the people not investing as much) as a result the gov't actually takes in LESS money then if they just let the tax be.

However, maybe all these people will pull their money out before the tax rate adjusts and put it in real estate instead. So, that might be a silver lining.

I think its difficult to predict what might happen given the economic climate.

I disgare. I think its more easy to predict what will happen. In trying times people cut back and go to what they know, there isn't very much optimism going around, why should we expect wealthy people to think any differently? The most wealthy people I know are some of the cheapest people I've ever met, if they think their money is in danger, they will act accordingly.

But wealthy people aren't going to just put their money under a mattress.

"What's worse: tax and spend or borrow and spend? "
Umm the article says tax and don't spend- which is an outright lie

"maybe increasing the tax on capital gains will encourage the rich to hold on to their stock longer to avoid the tax?"

More like sell off right before the tax goes into effect.

39.6%? Forty percent?! That just seems so high.

Agreed Modus. It's a socialistic policy that needs to be done away with, but instead we're increasing inequality.

It just seems like a skip and a jump away from having more than half your income go to taxes.

Modus - I don't think anyone here is naive enough to think this will be the last time he raises taxes.

mydia- No, they might invest in real estate (like i said) or they could just let it rot in savings accounts, which with a market tanking and an increase in what you have to pay on the off chance you actually earn something, does seem like an appealing option. Or they could invest in other countries.

If they invest in other countries they would still have to pay U.S. tax when they cash out those investments.

So we're going to punish the wealthy for being wealthy by taxing teir wealth away 'til they're no longer wealthy?

It seems to me that with with plan, there will no longer be any motivation to work, because the Gov't will just tax away your profits until "success" won't be worth it because the result of success will be failure. Does that make any sense?

Didn't Ronald Reagan raise taxes in 1982? Weren't we in a recession in 1982?

No one's going to tax the wealthy until they're broke - they're losing some of the tax cut bonuses they've had in the past decade.

mydiadem, the argument against high capital gains taxes goes something like this: if you bought some intel stock like a decade ago and you now believe it isn't going to grow much, and you find a young, scrappy company that needs to hire people and build plants so they can grow, you'd have to pony up for the capital gains tax if you sold your intel to buy stock in the young new company.

Presumably, some number of investors will decide to just hold the intel stock so they won't have to pay any tax rather than trade into a company that can use the capital more productively. This leads to a less efficient allocation of capital which slows growth to some degree.

There is no doubt that taxes have an impact on behavior. Often in difficult to measure and surprising ways. There is also no doubt that the government does need to tax citizens to pay for its activities. So it isn't ever a matter of one extreme or the other, but finding the right balance that allows us to understand the cost of our spending while making sure that we stay competitive so that our economy can produce jobs that allow for honest work to pay for life's needs.

"No one's going to tax the wealthy until they're broke - they're losing some of the tax cut bonuses they've had in the past decade."

Does anyone here actually know about taxes on the wealthy? I know people who pay more than half their paycheck in taxes now. True- they aren't broke, but they sure aren't getting to keep a lot of the money they earn.

I predict that a total 2 of the super wealthy people in this country will actually pay the full amount of taxes on their current income. I guarentee you that most of these people are already thinking about how to negotiate their compensation to minimize the taxes they are going to pay. As someone pointed out - the majority of wealthy people did not get to be so by being ambivalent about their money.

The capital gains thing is just sickening... no wonder the stock market continues to plummet. Pander, pander, pander.

Of course the rich are doing everything they can to minimize their taxes, even middle income people do that - it's just that rich people always have more tax saving options.

I would disagree with that steph. My husband and I make too much money to have a lot of tax write offs.

We don't qualify for SCHIPs (if we had kids), any of the homebuyers credits in the stimulus bills, adjusting our income with IRAs, and we can't write off a lot of expenses that other couples can.

Moreover, it's entirely possible that capital gains will hit us. Oh - and we actually owe money this year from interest we earned on a savings account... we made less money in interest than we now owe because of it. (I still haven't figured out how that happened).

Just because wealthy people try to adjust their incomes to avoid paying taxes does not make it OK to take more than half of their paycheck away. It's mindboggling to me that our society has sanctified taking away a higher percentage of income from people who work to earn their money. It's robbery.

mydia - Thats why you cash out before the tax is implemented. Hence the all the dumping we're sure to see.

Steph - Because more wealthy people have more money in more places.

I love that hating wealthy people has become the most accepted form of hate in this country.

"No one's going to tax the wealthy until they're broke - they're losing some of the tax cut bonuses they've had in the past decade."

So by that rationale I'll be stealing your breakfast and dinner, you won't starve, so why should you care?

Agreed, haus. Since when is it a crime to succeed in America?

The best way to reduce tax liability is to give to charity or put more money in your 401k or IRA. I'm not saying that raising taxes on the rich is fair, or that our current tax system is fair, I'm just not the kind of person that feels that the rich are being punished for being rich.

And we either pay taxes now or we pay taxes later(borrowing). With the nice deficit run up in the last 8 years that's just a given. You can't have it both ways, you can't complain about the risks of inflation because we have a huge deficit and then also complain about taxes being raised. Obama here is also cutting spending which has been completely overlooked in many comments here.

the one (telling) option your missing mydiadem is for the government to reduce spending.

mydia - he's cutting spending in national defence to up social spending. same story as always. i was hoping for some more independent thinking from him.

diadem-

Income limits for IRA write offs and contribution limits to 401(k)s peter out as you make more money. For example, adjusting your $200,000 salary by $16,500 does not help you much tax-wise.

The nice deficit run up over the past 8 years exploded to gargantuan proportions with the bailout (which Obama voted for), and Obama just passed the largest spending bill EVER.

I've seen two main complaints on this board, and the aren't out of line with reality. The first is that Obama (or Citizen) is spinning the new Presidency as a saving Presidency (which is laughable).

The second is that the burden of paying off the debt is - so far - falling on solely on the backs of the wealthy. Reacting to an economic downturn in this fashion has NEVER worked.

"Obama here is also cutting spending which has been completely overlooked in many comments here. "
What??First $250 bill ,then $800 bill, now $475 billion
Oh but he cuts military spending and now he is known for cutting spending. After spending over a trillion dollars, he has a lot of cutting to do to even out that number.

Good point Arthur.

Nice to see you here, BTW.

Arthur - note Mydiadem's last line.

Kranky, I said tax saving options, you said write-offs.
As Haus says, the richer you are, the more money you have in more places and there are all kinds of things to do so that you make a minimum on paper and have a maximum in your pocket.

Also, the more money you make the less you can write off. Sometimes taking a standard deduction is more beneficial, even though you have more write offs technically. Like child care expenses. That is a write off in a sliding scale.

Another good point Hainan.

I would also like to add that Obama has only *said* he will cut military spending. Now that we are sending more troops to Afghanistan, I wonder how he plans to accomplish this - cutting personnel? I could be completely ignorant of how the military works, but that seems like it would mean lots of unemployed soliders. Please someone correct me if I am wrong.

I too am curious if we are supposed to redirect our efforts to Afghanistan, aren't we just redirecting money, not really saving it?

Unless we're cutting it significantly and redirecting it. It seems like it would be better to have a "surge" of sorts and just get the ball rolling and everything accomplished there and be done with it.