Patterico's Pontifications

5/9/2008

Truthing Obamafuscations: Part One of a Continuing Series Through November

Posted by WLS: 

Now that there is a presumptive Dimocrit nominee for the general election, I’m going to start a recurring series of postings commenting on non-answers given by Obama to direct questions posed to him by the media and others. 

The problem I expect to see develop in the very near term is the dramatic curtailment of Obama’s availability to answer questions in a format that provides for any level of candidness.  He is clearly an effective speaker when working with a teleprompter and a script, but his impromptu responses to media questions are largely void of substance.  When they do have substance they often amount to a dodge of the issue, but sometimes they contain some nugget of information about the stealth candidate that is illuminating with respect to his real beliefs.  As these more revealing comments appear I’m going to highlight them, and the implications of those comments in future policy issues.

Yesterday Obama appeared on Wolf Blitzer’s show on CNN.  As an initial entry in this series, I present the following “answer” on a simple question about whether he might advocate an increase in the capital gains tax rate:

[Blitzer]   Because they’re arguing already that you want to increase capital gains taxes, for example, on investments, and stocks, and things like that.

(CROSSTALK)

BLITZER: A lot of middle-class people have those kinds of accounts. If they’re…

OBAMA: If they have, — Wolf, if they have a 401(k), then they are going to see those taxes deferred, and they’re going to pay ordinary income when they finally cash out. So, that’s a phony argument. And this is something that you have seen the Republicans consistently do, is they try to make this broad- based argument about, he’s going to raise your taxes as a cover for them eliminating taxes for people like myself and you, who can afford to pay a little bit more…

Now this was a pretty straight-forward question — whether he’s suspectible to GOP claims that he will raise the capital gains tax rate, and what that means for middle class Americans.   

Rather than address the question — by saying, for example, that the capital gains tax rate it too low and should be raised, or that  it is fine where it is and will be left alone — he answers with a complete obfuscation. 

401(k) plans have nothing to do with capital gains taxes.  Contributions to 401(k) plans are made with pre-tax earnings, and the withdrawals upon eligibility are taken as ordinary income and taxed accordingly at the tax rate applicable to the retiree — including that part of the plan’s funds the constitute appreciation/ capital gains.    

Wolf Blitzer is too much of an idiot to follow-up by pointing out that Obama hadn’t answered the question, and the issue of raising the capital gains tax rate extends far beyond simply raising taxes on the “rich”.  

To suggest that American households only own stocks in their 401(k) plan — and to ignore completely the issue of capital gains taxes on investment accounts, college savings accounts, on the sale of homes, farms, or other real property —  reflects either ignorance of basic tax issues, or an unwillingness by Obama to state his positions honestly.

Frankly, I think its more of the former than the latter. 

Obama would be only the most recent example in my life of a Harvard Law School egghead who lacked a basic comprehension of day-to-day issues facing ordinary Americans.  Some of the dumbest people I’ve ever met — including some of the worst lawyers I’ve ever encountered — were graduates of elite East Coast academic institutions.   

36 Responses to “Truthing Obamafuscations: Part One of a Continuing Series Through November”

  1. “401(k) plans have nothing to do with capital gains taxes. ”

    So all those middle class retirement plans that make capital gains are not going to be taxed at the lower capital gains rate? That seems important to the discussion on middle class people and the capital gains rate.

    But if you’re going to do this series on Obama’s answers to questions, I’d recommend you post the question too. Or at least a link to it.

    stef (8a38ef)

  2. But wait – isn’t Obama-wan our only hope? Doesn’t he rise above politics?

    How dare you suggest he is anything less than forthright? My God man, Barack Obama is the kindest, bravest, warmest, most wonderful human being I’ve ever known in my life.

    You must be a typical mean-spirited white person clinging to your guns and religion, & xenophobic.

    Even though mean people suck, the Obamessiah wants you to have a nice day.

    😉

    Horatio (a549f7)

  3. Stef, just because there isn’t a question mark doesn’t mean you can’t find the question.

    Yesterday Obama appeared on Wolf Blitzer’s show on CNN. As an initial entry in this series, I present the following “answer” on a simple question about whether he might advocate an increase in the capital gains tax rate:

    And no, 401(k) income is not the same as a capital gain (I can’t imagine where it would become one either). But he addressed this as well:

    401(k) plans have nothing to do with capital gains taxes. Contributions to 401(k) plans are made with pre-tax earnings, and the withdrawals upon eligibility are taken as ordinary income and taxed accordingly at the tax rate applicable to the retiree — including that part of the plan’s funds the constitute appreciation/ capital gains.

    I’d recommend reading the article before posting a comment. Or at least link to a clue.

    Stashiu3 (460dc1)

  4. So all those middle class retirement plans that make capital gains are not going to be taxed at the lower capital gains rate?

    They will be taxed at whatever rate is in effect when they withdraw monies.

    There is a huge pool of money just waiting for the fair-minded Obama-wan to take from those who worked hard and were wise enough to contribute to these plans, and give to those who didn’t.

    After all from each according to his ability, to each according to his need, is the Obamessiah’s overriding doctrine.

    Sounds reasonable to an atypical melanin-neutral, gun-loathing, religion-hating progressive.

    Horatio (a549f7)

  5. stef – the presumption is that about 90% of retirees will be making less income after 65 than they made while working. So, their overall tax rate on income will be lower.

    If you take $20,000 out of your 401(k) plan to fund your living expenses, and that is your only income, you will be taxed as if you earned $20,000 in the year you made the withdrawal.

    If you contributed that money in a year when you made $200,000 income, then you save a ton of taxes — you pay 15% on the $20,000 rather than the 38% or more you would have paid on it had you not put it in a tax-deferred account while you were working.

    WLS (68fd1f)

  6. “One of Barack Obama’s Middle East policy advisers disclosed yesterday that he had held meetings with the militant Palestinian group Hamas – prompting the likely Democratic nominee to sever all links with him.”

    Damn, more questionable associations. I’ll bet he just hates it when these things keep popping up.

    daleyrocks (906622)

  7. “One of Barack Obama’s Middle East policy advisers disclosed yesterday that he had held meetings with the militant Palestinian group Hamas – prompting the likely Democratic nominee to sever all links with him.”

    But…but…wasn’t meeting with Hamas OK for Jimmy, and isn’t B. Hussein O’Bama running to establish a 2nd Carter term?

    Horatio (a549f7)

  8. “Some of the dumbest people I’ve ever met — including some of the worst lawyers I’ve ever encountered — were graduates of elite East Coast academic institutions.”

    I have long felt that the requisite and path to political success in the U.S was a law degree from an ivy institution; ideally Harvard, Yale, or Princeton. While the smart, capable law graduates go into the private sector or straight to large, reputable firms and simply make a lot of money, the others, who despite the education don’t know shit, are still articulate and are able to convince the gullible populace that their ability to speak is a substitute for intelligence and capability. George Bush, despite the ivy credentials, is clearly a dunce–the better spoken run for Senate and House offices and careers as our betters.

    MikeD (b9f66a)

  9. If Obama was a Republican, the media would be filling their airtime with stories about how ignorant he is. Slate’s vapid “Bushisms of the Day” is filled with comments from Bush that make more sense than Obama does.

    SPQR (26be8b)

  10. One of Barack Obama’s Middle East policy advisers disclosed yesterday that he had held meetings with the militant Palestinian group Hamas – prompting the likely Democratic nominee to sever all links with him.”

    Damn, more questionable associations. I’ll bet he just hates it when these things keep popping up.

    I have several posts here about Robert Malley and his rather suspicious views toward Israel. Malley’s father was kicked out of France….FRANCE!…for having such vicious and disgusting views against Israel, Jewish people …and democracy in general.

    Malley…a Carter lackey…is an apple that did not fall far from his parental and mentor’s tree.

    The the little Carter pills that litter the Obama landscape are among the dozens of signal flares being sent up by this candidacy.

    Sen. Obama clearly retains an “open ear” (if not a completely open heart and checkbook) for the rabid anti-American worldview…and especially open ear for the Pro-Palestinian/anti-Israel worldview.

    He has a tin ear for the worldview of the VFW hall, or Joe Six Pack at the bowling alley….but the worldview of Frank Marshall Davis, Jeremiah Wright, Louis Farrakhan, Rashid Khalidi. Ali Abunimah, William Ayers, Bernarndine Dorhn, Sam Graham-Felsen….for those Che Guevara poster hangers, for the celebrators of the lives of Edward Said and for the likes of Hugo Chavez, Ahmadinejad, Kim Il Sung…Sen. Obama has an open ear.

    For the National Anthem, and a flag lapel pin…not so much.

    cfbleachers (4040c7)

  11. MikeD — yet George Bush had better grades at Yale than either John Kerry (Yale) or Al Gore (Harvard).

    And John McCain finished near the bottom of his class at the Naval Academy — thought those that remember him there say it was by choice not lack of ability. He just didn’t like to study subjects that didn’t interest him.

    WLS (68fd1f)

  12. I’d be surprised if substantial numbers of middle class people either (a) own stocks that would be subject to cap gains (please note that college savings plans are not); or (b) have houses that would produce gains over the 250k exclusion (500k for couples).

    Normally, when people talk about how normal people own stocks, they’re talking about things like college investment plans and 401k plans, so it makes sense that Obama would correct that premise.

    jpe (bd88bc)

  13. JPE: In California, just about anyone who has owned a house for more than ten years would produce gains over the exclusion.

    aphrael (e0cdc9)

  14. I don’t doubt that there are people that would be affected by an increase (and it’s not an increase I support), but it’s not the huge swath of people originally envisioned when the #s of 401k holders are wrongly included.

    (I’ll note also that median price in CA is 400. I’m sure a lot of people are still affected, but the number of people is a lot less than “just about anyone.”)

    jpe (bd88bc)

  15. jpe — I know that 529 plans are not subject to capital gains taxes, but many people have non-tax preferred investment accounts that they have created and funded for the educational expenses of their children. Often times they are nothing more than monthly contributions to mutual fund ccounts.

    The 529’s are rather new, and not widely used yet.

    WLS (68fd1f)

  16. jpe — the median home price of $400,000 in California includes a huge number of homes in the non-urban areas of Southern California and the Bay Area.

    In those locations – municipalities like San Jose, San Mateo, Walnut Creek, etc., in the Bay Area, and places like Santa Clarita, Thousand Oaks, Pasadena, Glendale, Rancho Cucamonga, Corona, Irvine, Mission Viejo — houses purchased in the mid-1990’s have appreciated far in excess of $500,000.

    WLS (68fd1f)

  17. The capital-gains thing keeps coming up, which is OK since it may affect anyone with some sort of capital (yes, including 401k).

    But why does he get a pass on raising the payroll tax? I have seen zero discussion of this –

    http://online.wsj.com/public/article_print/SB120847505709424727.html

    By the way, a higher capital gains tax rate isn’t the only middle-class tax increase that Mr. Obama is proposing. He also wants to lift the cap on wages subject to the payroll tax. That cap was $97,500 in 2007 and is $102,000 this year. “Those are a heck of a lot of people between $97,000 and $200[,000] and $250,000,” said Mr. Gibson. “If you raise the payroll taxes, that’s going to raise taxes on them.” Ignoring the no-tax pledge he had made five minutes earlier, Mr. Obama explained that such a tax increase was nevertheless necessary.

    OK, 250 grand is a lot of money. But it is a middle-class amount, at least for a household if not an individual.

    teqjack (54fa41)

  18. I find interesting your (perhaps) over-generalization of east-coast elite law school graduates. While I don’t reach the same conclusion about their level of intellect, I can say that almost every last one of them shortly becomes an over-inflated ego occupying an ill-fitting and expensive suit.

    I believe that you need to have some sort of innate intelligence to get into those schools, but the three years spent there merely inculcates the students’ minds with a sense of both entitlement and acquired laziness. It’s really a shame, because when many of these blowhards are finally recognized for such (and, in some places that can take far too long to come to pass), they’re too old to learn to renounce their attitudes and actually work for a living. Most of them gravitate to government work, since you never really need to work, and the ego can occasionally be of some use.

    Drewski (6416f7)

  19. “Stef, just because there isn’t a question mark doesn’t mean you can’t find the question.”

    He told me what it was about. But since we’re being precise about answers lets be precise about questions.

    ” And no, 401(k) income is not the same as a capital gain (I can’t imagine where it would become one either).”

    Isn’t it an investment that grows in value? Its growth over the principal is certainly a capital gain

    “If you take $20,000 out of your 401(k) plan to fund your living expenses, and that is your only income, you will be taxed as if you earned $20,000 in the year you made the withdrawal. ”

    So even if some of that money came from capital gains, the tax I pay on it is not the capital gains tax rate? I did not know that.

    “OK, 250 grand is a lot of money. But it is a middle-class amount, at least for a household if not an individual.”

    I do know that the payroll tax is at the individual, not household level.

    stef (b48186)

  20. jpe — the median home price of $400,000 in California includes a huge number of homes in the non-urban areas of Southern California and the Bay Area.

    The appreciation, not the price, would have to be 400k. I think we’re sufficiently into nitpicking territory, though, so you get last word.

    jpe (bd88bc)

  21. bleh. Appreciation would have to be 250k / 500k, not 400k, for cap gains to kick in. I saw your 400k number and ran with it, I guess.

    jpe (bd88bc)

  22. Damn, more questionable associations. I’ll bet he just hates it when these things keep popping up.

    Racist!

    Now, as for capital gains, it does affect middle class people. If we are in a bind and choose to take money out of a regular mutual fund rather than out of a 401(k) with penalties for early withdrawal, we get slammed with capital gains–a penalty for investing already taxed dollars into business.

    Obama is so caught up in his own aura he has no idea how regular people live. He doesn’t care, either. After all, we’re all “typical white people.”

    Patricia (f56a97)

  23. re: comment #11. I am aware of this WLS.

    GWB is not nearly as stupid as most insist on portraying; he just doesn’t speak all that well. John Kerry and Al Gore are smoother (or so it would appear) and wax poetic while containing no substance. They do not stumble or mispeak to the same degree as GW. But Kerry and Gore are frauds and,I would bet, old George is a lot brighter than either of these two sad-sacks. Same thing about Obama–a truly empty suit without real intellectual substance. But this is lost on too large a segment of the population because he speaks (cons)so well.

    MikeD (b9f66a)

  24. Patricia – Yeah, nobady has done more for Israel than Obama. He’ll tell you so himself. It’s just kinda funny he has some many anti-Israel types on his foreign policy advisory team. It’s probably just for diversity or something. Yeah, that’s it!

    Jingoistic, redneck, neocon!

    daleyrocks (906622)

  25. A couple of comments. There are about 105 million people who hold stocks privately. Not all are millionaires. Two- Companies whose stocks are subject to capital gains tax hikes make decisions that may affect income that goes to tax exempt 401 k plans.

    People who don’t know anything about economics make decisions assuming facts not in evidence; such as people sitting there passively accepting tax hikes without taking action to reduce tax exposure.
    The “Bush is a dunce” people seem to correspond fairly closely to those who don’t know any economics. I wonder why ?

    Mike K (86bddb)

  26. The failures of President Bush have ruined conservatism for years to come. Results matter, and the conservatives can’t run away from Bush’s incompetence.

    Obama proposes to eliminate SSN cap, raise income taxes and raise capital gains taxes. For small business owners in California, the marginal tax rate goes up to 64%. In Texas it will be 55%. Sure, many business owners will stay the course, stay in business. Many will decide to just not work – because they don’t have to.

    What an awesome choice we have – Obama’s insane plan or McCain saying he won’t mess things up as much as Bush.

    Wesson (785f2a)

  27. You are quite correct Wesson. 330 million people and the US electorate has offered up Dumb, Dumber, and Dumbest. Or Larry, Curly and Moe. Take your pick. 330 million people and we get these three. Makes you wonder if the Founders really knew what they were doing.

    MikeD (b9f66a)

  28. I think the Founders got it right. We don’t need to waste the smartest people on political jobs. We need smart people working to make the economy as efficient and productive as possible.

    DRJ (a431ca)

  29. I agree DRJ, the founders probably did. But my word, when you say “We don’t need to waste the smartest people on political jobs.”, did we have to take this advice so much to heart?

    MikeD (b9f66a)

  30. Stock market prices–and stock purchaser expectations–take capital gains tax rates into account–they are factored into the market price of stocks. It frankly doesn’t matter a damn bit whether stocks are held in 401(k)s or in some plutocrat’s portfolio. Higher capital gains tax rates mean lower stock prices. And Joe Blutarsky, a steel mill worker in Gary Indiana, doesn’t get as much money in his 401(k)account at the end of his career because Obama raised the capital gains tax rates and therefore the shares of Indiana Steel didn’t rise to the levels Joe expected. If Obama had a clue, he wouldn’t be half so dangerous.

    Mike Myers (31af82)

  31. Mike Myers:

    I am surprised it took 30 commnents for someone to mention that a capital gains tax would effect the long term investment of 401ks.

    davod (5bdbd3)

  32. Mike – Looking at the average portfolio turnover of most mutual funds, I would argue that most fund managers don’t give a shit about capital gains taxes unless specifically stated in the fund objectives. Individuals are much more likely to keep a close eye on holding periods and the timing of gains and losses and tax rates.

    daleyrocks (906622)

  33. I think you’ve missed Mike’s point there, daleyrocks. It’s not about fund managers. It’s about the overall market impact of the government taxing a larger portion of investment. The higher the percentage of investment that government takes, the less that will be available in the market. Thus, overall market value is lower as investment capital (especially in a global marketplace) migrates to better post-tax returns in other markets.

    Mike’s point was dead on.

    CalDevil (ac7762)

  34. Mike Myers is exactly right — I wasn’t trying to gloss over the fact that higher cap gains taxes have an overall negative effect on the market and do, therefore, drive down share prices thus impacting 401(k) plans. That was simply a step beyond which I was trying to make — that Obama either has no clue about 401(k) plans and capital gains tax rates, or he purposely evaded answering a simple question about his view on the propriety of raising the cap gain tax rate.

    wls (328b4b)

  35. CalDevil – I understand what you’re saying, but what returns get advertised in publications – the pretax returns. Fund managers get judged and money moves for the most part based on pretax returns. The only reason capital gains or ordinary tax rates are relevant between markets is if the money is in taxable accounts. That rules out pension fund managers, most insurance products based on asset accumulation, 401k’s and similar products, and other tax deferred vehicles. With tiered tax rates depending on holding periods the short term rate only comes into play if I intend to trade my portfolio. Given that people can buy U.S. stocks overseas and foreign stocks (ADRs) in the U.S., I’m not sure I buy Mike’s tax rate argument.

    daleyrocks (906622)

  36. Wait a minute. While I’m not an Obama fan, I don’t think this criticism is (completely) justified. While I’m not a tax expert, I am pretty sure that if you sell one asset and buy another in the context of a 401(k) plan, it isn’t subject to any tax, including capital gains. Then, of course, when you retire and start living off the income, you are taxed at the normal rate for the income you pull out. So, assuming that most middle class folks own capital assets in the context of a 401(k)plan (an iffy assumption, given that the most significant asset most people own is their house), increasing the capital gains tax won’t effect them.

    Roscoe (a058ca)


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