It looks obvious

Obama’s promise to eliminate the federal income tax on earning of $50,000 or less for senior citizens has drawn obvious criticism:

If you’re a senior citizen and make less than $50,000 a year, Barack Obama has a deal for you: the rest of your life free of federal income tax.

Sounds appealing, right? Maybe to many seniors. But tax policy experts in Washington are giving it bad reviews. They see it as another subsidy for senior citizens, who already get federal help through Social Security and Medicare and often have economic advantages over other demographic groups.

Seniors typically have paid off their mortgages. Many have investments and usually don’t pay taxes on their Social Security benefits. The kids are usually grown, so they’re not saddled with day care or college costs.

“The odds are the retired folks - they’re getting pensions, they’re getting Social Security, they have investment assets, they own a house - so … they’re better off than somebody who is 30 or 40 years younger who’s trying to buy a house (and) trying to start saving,” said Clint Stretch, managing principal of tax policy for Deloitte Tax.

While the criticism makes sense - economically and morally - it failed to address the main issue on hand. This proposal has nothing to do with social justice, nor with wise tax policy and have everything to do with pandering potential voters. After all older voters votes in higher percentage than younger voters and bribing them, while pretending to care about social justice, is practical. And since Obama didn’t care about social justice, morality or any of those unimportant things, his proposal needs to be evaluated for what it intended to achieve - get the votes.

The question of how to limit the power of senior citizens, or any other large interest group, from robbing the rest of us is completely different topic.

Via tjic

The american cars industry problem didn’t start from the rising oil price, they started because the auto makers are less competitive than their rivals - mostly the corporations based in Japan. In order to sell more cars, and increase their profit, the auto makers need to become more competitive by selling better cars for less money. This is obviously easier said than done, but it happened in the past and if the car manufactures can’t do it again they should disappear. One sure way for not helping is by handing them money they didn’t earn:

Presumed Democratic Presidential candidate Barack Obama told the UAW in a letter that he supports the $4B in federal aid, stating that he would “provide real solutions necessary to help this industry compete and win in the global economy.”

I don’t really think that Obama, or any other candidate, misunderstanding this basic economic. But what we see here isn’t economic rather than a bribe, and the question of the long term effect is only measured as far as November 2008. 

(via the club of growth)

I always resist the term “Free” when it was attached to government services. After all, those services aren’t really free - someone is paying for them. It can be either my tax money, or someone else tax money. But the appeal of increasing government services, and the notion that they are given for free, is pretty obvious when looking at this set of data:

New data from the IRS will be out in a few weeks on who pays how much in taxes. My contacts at the Treasury Department tell me that for the first time in decades, and perhaps ever, the richest 1% of tax filers will have paid more than 40% of the income tax burden. The top 50% will account for 97% of all federal income taxes, while the bottom 50% will have paid just 3%.

It is pretty obvious why no seeking re-election politician would want to really change the tax system - this is the best way to appeal to large group of voters. Is it the right thing, morally and economically, to do? that was never an issue that bothered politicians.

Windfall profit Tax is as stupid and as populist idea as its twin monster the gas tax holiday. It was quite obvious from the beginning that the suggestion to impose the windfall profit tax was made as a counter offer to the gas tax holiday. Therefore it shouldn’t be surprising that the democrat majority was blocked so easily. Both Republicans and Democrats scored points with their potential voters and cause no real harm.

Now lets see how much fun can it be if someone will suggest windfall tax on the farmers who enjoy the rise of food prices. After all it make as much sense as windfall tax on oil companies - none.