Q: Would Obama tax my profits if I sell my home? Would he tax my IRA? Would he tax my water?
A: No. A new e-mail being circulated about Obama's tax proposals is almost entirely false.
FULL QUESTION
I was just sent this and it had 100s of names attached and forwarded over and over – is it real?
Subject: Important read – TaxesINTERESTING DATA JUST RECEIVED ON TAXES
Spread the word…..
This is something you should be aware of so you don't get blind-sided. This is really going to catch a lot of families off guard. It should make you worry.
Proposed changes in taxes after 2008 General election:
CAPITAL GAINS TAX
MCCAIN 0% on home sales up to $500,000 per home (couples) McCain does not propose any change in existing home sales income tax.
OBAMA
28% on profit from ALL home sales
How does this affect you? If you sell your home and make a profit, you will pay 28% of your gain on taxes.
If you are heading toward retirement and would like to down-size your home or move into a retirement community, 28% of the money you make from your home will go to taxes. This proposal will adversely affect the elderly who are counting on the income from their homes as part of their retirement income.
DIVIDEND TAX
MCCAIN 15% (no change)
OBAMA 39.6%
How will this affect you? If you have any money invested in stock market, IRA, mutual funds, college funds, life insurance, retirement accounts, or anything that pays or reinvests dividends, you will now be paying nearly 40% of the money earned on taxes if Obama become president.
The experts predict that 'higher tax rates on dividends and capital gains would crash the stock market yet do absolutely nothing to cut the deficit.
INCOME TAX
MCCAIN (no changes) Single making 30K – tax $4,500 Single making 50K – tax $12,500 Single making 75K – tax $18,750 Married making 60K- tax $9,000 Married making 75K – tax $18,750 Married making 125K – tax $31,250
OBAMA (reversion to pre-Bush tax cuts) Single making 30K – tax $8,400 Single making 50K – tax $14,000 Single making 75K – tax $23,250 Married making 60K – tax $16,800 Married making 75K – tax $21,000 Married making 125K – tax $38,750
Under Obama your taxes will more than double! How does this affect you? No explanation needed. This is pretty straight forward.
INHERITANCE TAX
MCCAIN 0% (No change, Bush repealed this tax)
OBAMA Restore the inheritance tax How does this affect you? Many families have lost businesses, farms and ranches, and homes that have been in their families for generations because they could not afford the inheritance tax. Those willing their assets to loved ones will not only lose them to these taxes.
NEW TAXES BEING PROPOSED BY OBAMA
* New government taxes proposed on homes that are more than 2400 square feet
* New gasoline taxes (as if gas weren't high enough already)
* New taxes on natural resources consumption (heating gas, water, electricity)
* New taxes on retirement accounts and last but not least….
* New taxes to pay for socialized medicine so we can receive the same level of medical care as other third-world countries!!!
FULL ANSWER
Alert readers may already have noted that this chain e-mail does not provide links to any of Obama's actual proposals or cite any sources for the claims it makes. That is because they are made up. This widely distributed message is so full of misinformation that we find it impossible to believe that it is the result of simple ignorance or carelessness on the part of the writer. Almost nothing it says about Obama's tax proposals is true. We conclude that this deception is deliberate.
Our own sources for the following are Obama's own Web site and other statements, interviews with Obama's policy advisers, and a comprehensive analysis of both the McCain and Obama tax plans produced by the Urban-Brookings Tax Policy Center, plus additional sources to which we have provided links
- Home Sales: The claim that Obama would impose a 28 percent tax on the profit from "all home sales" is false. Both Obama and McCain would continue to exempt the first $250,000 of gain from the sale of a primary residence ($500,000 for a married couple filing jointly) which results in zero tax on all but a very few home sales.
- Capital Gains Rate: It's untrue that Obama is proposing a 28 percent capital gains tax rate. He said in an interview on CNBC that he favors raising the top rate on capital gains from its present 15 percent to 20 percent or more, but no higher than 28 percent. And as for a 28 percent rate, he added, "my guess would be it would be significantly lower than that." Furthermore, he has said only couples making $250,000 or more (or, his policy advisers tell us, singles making more than $200,000) would pay the higher capital gains rate. That means the large majority of persons who pay capital gains taxes would see no increase at all.
- Taxing IRAs and 529s: Contrary to the claim in this e-mail, raising tax rates on capital gains or dividends would not result in higher taxes on any investments held in Individual Retirement Accounts or in popular, tax-deferred "college funds" under section 529 of the Internal Revenue Code. The whole point of such tax-deferred plans is that dividends and capital gains are allowed to accumulate and compound tax-free, and neither Obama nor McCain proposes to change that. And as previously mentioned, any capital gains or dividend income from stocks, bonds or mutual funds owned outside of tax-deferred accounts would continue to be taxed at current rates except for couples making over $250,000, or singles making more than $200,000.
- Doubled Taxes? The claim that "Under Obama your taxes will more than double!" is also false. The comparative rate tables this e-mail provides for McCain and Obama are entirely wrong, as we explained in an earlier article March 13 about another false e-mail from which these tables are copied. It is supposedly a comparison of tax rates before and after the Bush tax cuts, but it grossly overstates the effect of the Bush cuts. Furthermore, Obama proposes to retain the Bush cuts for every single income level shown in this bogus table.
- Estate Tax: The claim that Obama proposes to "restore the inheritance tax" is also false, as are the claims that McCain would impose zero tax and that Bush "repealed" it. McCain and Obama both would retain a reduced version of the estate tax, as it is correctly called, though McCain would reduce it by more.
The tax now falls only on estates valued at more than $2 million (effectively $4 million for couples able to set up the required legal and financial arrangements). It reaches a maximum rate of 45 percent on amounts more than that. It was not repealed, but it is set to expire temporarily in 2010, then return in 2011, when it would apply to estates valued at more than $1 million ($2 million for couples), with the maximum rate rising to 55 percent.
Obama has proposed to apply the tax only to estates valued at more than $3.5 million ($7 million for couples), holding the maximum rate at 45 percent. McCain would apply it to estates worth more than $5 million ($10 million for couples), with a maximum rate of 15 percent.
- "New Tax" Falsehoods: The e-mail continues with a string of made-up taxes that it falsely claims Obama has proposed. He has not proposed a tax on new homes with more than 2,400 square feet, or a new gasoline tax or a tax on retirement accounts. The most laughably false claim is that Obama would tax "water."
Two claims in this message, while not completely false, are still grossly misleading.
The claim that Obama would impose "new taxes on natural resources" may refer to his support for a cap-and-trade system to reduce carbon emissions, which indeed would impose large costs on industries burning coal, gas or oil and, indirectly, on their consumers. But McCain also supports cap-and-trade legislation, and even coauthored an early version of a bill that reached the Senate floor this year. Obama's plan would give the federal government more of the revenue from auctioning pollution permits than McCain's plan. Whether cap-and-trade amounts to a "tax" is a matter of interpretation. The fact is neither McCain nor Obama call it that.
There is also some truth to the claim that Obama would impose "new taxes" to finance his health care plan, depending on your interpretation of "new." He has said he would pay for much of his plan "by allowing the Bush tax cuts to expire for people making more than $250,000 per year, as they are scheduled to do." That would certainly be a tax increase for those high-income persons, compared with what they are paying now. But whether that's imposing a new tax, or just letting an old one come back, depends on your point of view. It may well be that Obama will eventually propose tax increases to finance some of his plan. We've noted before that the "cost savings" that he says will finance much of his plan are inflated and probably won't materialize, according to independent experts we consulted. But it's wrong to say that he's proposing such taxes now.
The short answer to our reader's question is, no, this message isn't real. It's a pack of lies.
Wachovia Apologizes
Update, Aug. 27: One version of this e-mail was sent around by a financial professional, Robert Jenkins, a vice president of Wachovia Securities in St. Louis, Mo. Even though Jenkins is an investment adviser and not a tax expert, we thought his endorsement might seem to some readers to give this false e-mail greater credibility. So we attempted to ask Jenkins about the matter. But instead of a reply from him, we received the following message from another Wachovia official, whose identity we confirmed by telephone:
Thank you for contacting Wachovia regarding a recent email regarding "proposed changes in taxes after the 2008 General election." Please know that Wachovia does not endorse any political party, candidate, or initiative, and that our Firm did not endorse or approve the email as it is contrary to our Code of Conduct and Corporate Values.
Members of executive and departmental leadership in Wachovia Corporation and Wachovia Securities have been made aware of the email, and Robert Jenkins has been dealt with appropriately and directly. Every effort has been made to ensure that no additional emails or communications of this nature will be issued by any member of our Firm.
We sincerely apologize for this unfortunate incident.
Cynthia Plackemeier
Assistant Branch Manager
We later contacted William Mannen, a Wachovia vice president for branch administration in St. Louis. He declined to say whether or not Jenkins is still employed by Wachovia.
–Brooks Jackson
Sources
“Energy and Environment. “Barack Obama’s Web site, accessed 10 July 2008.
News Release: “CNBC’s Maria Bartiromo Speaks with Senator Barack Obama on CNBC’s “Closing Bell.” 27 March 2008.
CNBC Web site. “Plan to Strengthen the Economy.” Barack Obama’s Web site, accessed 10 July 2008.
Tax Policy Center: Urban Institute and Brookings Institution. “A Preliminary Analysis of the 2008 Presidential Candidates’ Tax Plans,” 20 June 2008.