Spreading the Wealth:
More Audacity of Obama
Barack Obama recently told "Joe the Plumber" the importance of "spreading the wealth around." And if you watch his rhetoric, you will see that "spreading the wealth" and "economic justice" are cornerstones of his political philosophy. A recording of a 2001 interview has him lamenting that the Civil Rights movement of the 1960's failed to bring about a redistribution of wealth in this country.
Joe the Plumber was right to be concerned about Barack Obama taking his hard-earned money and "spreading the wealth" to others who don't want to work as hard as Joe. If you want an idea of what kind of society that would produce, take a look at New Orleans, and how its citizens responded to Hurricane Katrina.
New Orleans is a great city, with a rich and colorful history, but it is also a "poster child" for the attitude of those who expect the government to take care of them. How many New Orleans residents did you see sitting on their rears, waiting for "the government" to come in and rescue them, and complaining at every opportunity that it wasn't enough, or that it wasn't happening fast enough? How many are still waiting for the government to come in and build them a new home, without lifting their own hands to do what they can to help themselves?
By contrast, how much of that did you see when Hurricane Rita struck Texas right after that? Not much. Those Texas folks pulled up their boots and got to work, cleaning up their own cities and homes, and didn't wait for anybody to come along and rescue them.
But Barack Obama's plans for "spreading the wealth" around would create more folks like those we saw in New Orleans, sitting around with their hands out, waiting for the government to come along and fill their hands with YOUR money. And they EXPECT that we OWE it to them, and that they're entitled to sit around and collect a portion of your hard-earned money.
To boil it down, Barack Obama is talking about "giving them a fish," and specifically, part of YOUR fish.
By contrast, John McCain is talking about "teaching them to fish," by creating job opportunities and not taxing small business to the point where it can't afford to hire more workers.
Under John McCain's plan, people would be rewarded for their own efforts. Under Barack Obama's plan, other people would be rewarded for your efforts. You would be expected to share your results with others who were unwilling to work as hard to take care of their own families.
How Strongly does Barack Obama Believe in Spreading the Wealth?
One of the best measures of how strongly a person believes in what he's saying is whether he "puts his money where his mouth is." We're afraid Barack Obama isn't doing a very good job of carrying out his own policy of "economic justice" or "spreading the wealth around."
And we heard Michelle Obama stumping for her husband, explaining that "someone will have to give up a piece of the pie so that someone else can have more." So, does Michelle follow that advice for her own family? How much of HER pie does Michelle share?
Listening to the two of them in their political speeches, we would expect them to be very generous in spreading their own wealth around, would we not?
There's a reason for that old political saying about Democrats spending other people's money. An examination of Barack Obama's recent income tax returns shows that he believes in spreading the wealth around for Joe the Plumber and for you, but not for himself and his family. Yet another example of a politician saying, "Do as I say, not as I do."
Columnist Hank Adler examined Barack Obama's tax returns, and reported on his findings at TownHall.com. Adler was a public accountant for almost 34 years, the last 20 of which was spent as a top partner at the accounting firm Deloitte & Touche.
He describes the Obamas' charitable contributions as "miniscule" and "negligible." Adler reports that between 2001 and 2004, the Obamas reported less than $8400 in charitable giving with earned income over $981,000. That's $1400 less than one percent of their income they were willing to "spread around."
In 2005 and 2006, their charitable contributions rose to 3.5%. Their adjusted gross income then included book proceeds, and rose to $2.6 million. Of that, $92,867 of their wealth was "spread around" to help those less fortunate. During that time frame, Michelle Obama's salary from University of Chicago Hospitals almost tripled after her husband's election as a U.S. Senator, to $316,962 plus Board of Director's fees of an additional $45,000. [And the following year, he requested earmarks in excess of $1 million for his wife's employer.]
In 2007, the Obamas increased their charitable contributions to a whopping 5.7% of their gross income. That's $240,000 to charity, which sounds very generous until you realize that their combined gross income for 2007 was $4.2 million.
[As an aside, that's a good example of the value of writing a book, if you're a celebrity and/or have a political campaign to publicize it. Those two huge jumps in the Obamas' income reflect the re-release in late 2004 of his 1995 book, Dreams from My Father, and the publication of The Audacity of Hope, which, not coincidentally, came as he began his campaign for President.]
Examining the Obama Tax Plan
In 2007, Barack Obama apparently hired a tax planner to help him shield more of his own income from taxes, while his "economic justice" would take more of YOUR income for "spreading the wealth around."
That's a good example of one of the reasons the middle class is hardest hit by tax increases. The wealthy just hire tax planners to find the best loopholes for them, so they are able to shield a good portion of their income from taxes. Unfortunately, most middle class taxpayers are not even aware that some of these loopholes exist, nor do they know there are tax planners who can help them take advantage of them. If they do know such tax planners exist, they don't feel they can afford them, or are afraid that the tax savings won't justify the expense.
For many people, the tax savings will absolutely justify the expense. You should know, however, that the average tax CPA is not even aware of some of these most advantageous loopholes. [One of the reasons we started this website was to help teach our military families how they can take advantage of some of these tax loopholes to save money for their own families.]
So, just what is the Obamas' new personal tax plan? Well, Adler says the Obamas implemented three significant tax planning ideas in 2007:
- The Senator created a Simplified Employee Pension (SEP) for himself, which allowed him to contribute (and deduct) $45,000 to his new personal retirement plan. This personal retirement plan is in addition to his government pensions and his wife's pension from University of Chicago Hospitals.
- Senator Obama "placed virtually his entire after-tax book proceeds into tax-free municipal bonds, which produced non-taxable income of $45,000 and provided insulation against the recent stock market implosion" [Hmmm . . . makes one wonder if he knew the stock market implosion was coming, doesn't it? Or was he just "lucky" in his choice of investments?]
- The Senator and his wife created tax-free College Savings Plans for each daughter with total funding of $240,000. What this means is that so long as these funds are used for educational purposes, the Obama daughters can earn investment income on these funds without ever paying federal income taxes on that income.
How many of you even knew such a plan was available? It's probably the best tax loophole Congress ever created, yet relatively few people even know it exists. Unless you have enough income to afford a tax planner, or you've spent considerable time researching it yourself, you've likely never even heard of it.
As Adler points out, any competent tax advisor would have recommended these tax savings strategies for a taxpayer with this amount of income. He goes on to say, "While these opportunities are obviously available to anyone, only wealthy taxpayers have the funds necessary to implement such planning."
So, how much do these steps save the Obama family in federal income taxes? Adler looks at each one:
- SEP tax savings -- Federal tax savings for 2007: approximately $15,400. Not bad -- contribute $45,000 to your own pension plan and save yourself 34% of that amount on your federal income tax in the first year alone! That means the $45,000 contribution to his pension plan really only cost him $30,000. Adler points out, "Assuming that Senator Obama's book fees continue or he has other sources of income, by age seventy, with a six percent annual return [and the wealthy have opportunities to earn much more than 6 percent], this retirement plan should have just short of $2 million of untaxed earnings and interest." Nice.
Barack Obama believes in spreading the wealth around, as long as it's YOURS and not his. He has set up his finances to accumulate millions in tax-free money for himself, while taxing you for redistributing or "spreading the wealth around."
- Tax Exempt Income -- The Senator's uncannily prescient investment of his book proceeds into tax-exempt municipal bonds rather than the stock market -- we still have to wonder if he was expecting the October stock market collapse -- provided him with tax savings in 2007 of approximately $15,000.
Adler says, "The long term tax savings that could result from this strategy are very significant. If the amount stays at $45,000 of tax-free income [remember, that's just the annual income generated by the investment and doesn't include the principal amount that was originally invested], the annual savings will remain, at current tax rates, about $15,000 and through the Senator's seventieth birthday, with reinvestment at the same tax-free rates, the Senator would have almost $2.8 million with untaxed earnings of about $1.9 million. If he should continue the strategy with additional investment in tax-free securities, he could amass millions of dollars of income which would not be subject to federal income tax."
It's an obvious fact that your wealth grows much faster if you don't have to give 30% to 50% of it to the government in taxes. But it's only the wealthy who can afford the tax planning advice that allows them to shield their income from the taxes that you pay. That's just one of the ways "the rich get richer, and the poor get poorer."
- College Funds -- Federal tax savings in 2007: none. Future tax savings: significant. Adler says, "The $240,000 invested in these funds will create non-taxable income during the lives of the funds and annually and permanently save the Obamas about $6,000 of Federal income taxes."
As we said, this is one of the best tax loopholes Congress ever created, and we recommend that every family who qualifies set one up. It doesn't have to be funded with $240,000. But whatever you can afford to put away for your child's education can earn tax-free income if it's put into one of these plans. Ask your tax advisor about it, and put as much money as you can into it.
[While we're on the subject of tax planning, allow us to just mention that if you have sufficient income levels to allow you a bit of flexibility, it would be well worth your while to invest in learning about the tax saving opportunities available to you in the form of legitimate tax loopholes. Many CPAs, even many tax CPA's (who specialize in preparation of income tax returns), either aren't aware of some of these provisions, or just don't recommend them to their clients, so if you have sufficient income to justify the expense, find a competent tax planner who makes it his or her business to study the loopholes in our tax code to help you maximize your benefit from them, just as Senator Obama has done. If you have your income taxes done by the well-known tax-preparation firms, it is unlikely that their tax preparers will know anything about these loopholes.]
Let us wrap this up with this comment: While Senator Obama's new personal tax plan seems like a good idea to minimize his federal income taxes while maximizing his own family's wealth, how does that match his widely-touted political position to use the tax code to support his plan of "spreading the wealth around?"
C'mon Senator, put your money where your mouth is! How do you expect us to buy into your plan if you don't buy into it yourself?
And listen to this quote from Karl Marx: "FROM each according to his ability;
TO each according to his need."
Doesn't that pretty much sum up Obama's "economic justice"? I'd say that makes him a Marxist, wouldn't you? The Obama campaign got its nose seriously out of joint when an Orlando reporter read that quote to Joe Biden and asked him how Obama's plan wasn't Marxist. We think she was right on the money. We don't see much difference between Obama's "economic justice" and Marx's socialism.
And how interesting do you find it that in the year before he expects to be elected President and raise your taxes to support his plan of spreading the wealth around, Barack Obama takes significant steps to shield his own personal income from federal taxes, so that much of his income is not subject to federal income tax at all?
And his running mate? Well, while his boss is doing everything possible to shield his income from federal income tax, Joe Biden is trying to placate voters by telling them "it's patriotic" to pay more taxes! Oops -- Biden is having a serious problem with foot-in-mouth disease during this campaign.
USAToday reports that Democratic vice-presidential candidate Joe Biden and his wife Jill donated an average of $369 a year to charity for the past decade! The highest amount was $995 in 2007, or 0.3% of their income, and the lowest amount was $120 in 1999, about 0.1% of their income that year.
These two yahoos want you to buy into their idea of "spreading the wealth around," while failing to do so themselves.
How Does McCain's Charitable Giving Compare?
In contrast, Philanthropy.com reports that in 2007, John McCain donated 26 percent of his total income to charity, as reported on his tax returns. The Senator's total income for 2007 was $405,409, and he donated $105,467 to charity, according to his federal income tax returns.
You probably know by now that John McCain's wife Cindy inherited a very valuable beer distribution company upon the death of her parents. You may also know that the McCains have a pre-nuptial agreement that keeps their finances separate (smart woman!), and that for the 27 years of their marriage, they have filed separate tax returns. That means they pay taxes at a higher rate than if they filed joint returns. But that is a price Cindy McCain was willing to pay for privacy about her own personal financial situation. She was not the elected public official and felt her personal income and expenses were not the public's business.
We do know, however, that Cindy McCain devotes a good bit of her personal time to supporting and promoting charitable causes such as Operation Smile, which provides facial reconstructive surgery to children born with cleft palates and/or cleft lips like their adopted daughter Bridget, who was rescued by Cindy from Mother Theresa's orphanage in Bangladesh, and the Halo Trust, dedicated to removing land mines that maim and kill innocent children around the world.
We have one candidate who makes a lot of noise about spreading the wealth to take care of those less fortunate, but refuses to share much of his own, and implements tax-saving strategies designed to shield his own income from taxes before he has the chance to raise your taxes. And we have another who quietly goes about sharing his wealth with those less fortunate, with no fanfare.
So, voters, which candidate do you want to elect? The one who talks the talk,
or the one who walks the walk?
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