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What are the economic realities of the Obama proposals?

A case study. Jane (not her real name) is a manager at an average sit down restaurant. She earns a base salary of $36,000 a year and 3% bonuses based on net income. For 2007 she earned just over $42,000. Under the Obama tax plan she will receive $1000 additional back in taxes. (From his website) She currently has 18 full time non-tipped employees that make less than $9.50 /hr. With their average wage being $7.00 /hr. The proposed Obama minimum wage is $9.50. (The current minimum wage is $6.55 /hr set to increase to $7.25 in July 2009) The annual increase in labor costs is just over $100,000. This money comes directly out of net profits. Without increasing prices, that is a reduction of $3000 in her income. Additionally, the effects of increased capital gains taxes will further erode net profits and reduce her income by another $400. That is a $3400 reduction in wages, slightly over an 8% cut in pay. Add the tax rebate and it is still slightly less than a 6% reduction in buying powered. The effects of lower net corporate profits due to higher labor costs and higher corporate and capital gains taxes will reduce corporate profits, thus reducing the stock prices contributing to an overall lower market value, reducing the earnings of her 401k and retirement accounts. To keep this valued employee and to maintain net profits and stock price the company will have no other option but to reduce payroll expenses, that is lay people off, and increase their prices. This will be compounded by the fact that their suppliers will be faced with similar dilemmas. You’ll end up paying higher prices for goods and services and get less return on your investments. So what on the surface sounds like a great deal, paying less in taxes, in reality will cost you more. That is, if you’re not one of those who’s job is eliminated. For 'stereoisomers are cool' It is hard to believe you are a math major, this is simple mathematics. Rates have been specified in text and by reference. From the text it is obvious that the calculations are annualized. 3% of $100K is $3000, $400 is an estimate based on the proposed corporate and capital gains tax increases of a minimum of 3%. $3400 is slightly over 8%(3400 divided by 42000) $2400 is just under 6%(2400 divided by 42000) For Gumby, You are correct sir the expiration of tax cuts were not included. For her income that will amount to an increase of $790 in taxes annually, still more beneficial than those proposed.

Public Comments

1. Thank you for a realistic study of reality. The kool aid drinkers won't listen though, they can't hear the truth over the roar of working less, screwing the "rich" and free stuff. We are in deep trouble.
2. Thank you. People cant seem to understand that others arent just effected by one of his policies. He is an economic disaster.
3. "Without increasing prices, that is a reduction of $3000 in her income. Additionally, the effects of increased capital gains taxes will further erode net profits and reduce her income by another $400. That is a $3400 reduction in wages, slightly over an 8% cut in pay. Add the tax rebate and it is still slightly less than a 6% reduction in buying powered." Being a math major I can tell you flatout that if you don't prove your reasoning in a stepwise fashion you are BSing. Where is your mathematical modelling? Time is not specified, rates are not specified, percentage of reduction cannot be obtained without these bits
4. You forgot to add one thing... The Bush tax cuts are due to expire in 2010, hence, a tax INCREASE! Yet, we hear no talk about this little tidbit.
5. Neeno, I am a Obama supporter, however, I have a genuinely good friend in my ear who is a McCain supporter and a staunch and I do mean staunch Republican. I promised him I would get back to him on this very issue. Here is what confuses me. It is what is happening before either McCain or Obama can be elected to the Presidency. Secretary Paulson and President Bush state that we are not going in a socialized path. Ok. However, the government is providing liquidity intravenously to the banks. The financial sector screwed up royal. The government comes to the rescue and brokers a deal(s) with brokerage houses. So, the American taxpayer is lending money to business. Shouldn't we be getting a return on investment, like thousands of dollars, eventually? Isn't that the right thing to do? If this is the case, wouldn't the government need to scratch a check to you and me? Or pay off the debt with the return on investment? Could this be what Obama means to do? Now, to McCain and Obama's policies. It appears the train has left the station and both candidates have to run as fast as they can, hold on to their hats and catch the caboose, with one falling off and rolling on the ground, the other looking back smiling pulling himself on board. To extend the metaphor, he has to go through each car to get to the front of the train. Suppose these train cars are segments of our financial system, it's moving it's picking up steam one way or another. When you make predictions on taxes and financial policies alongside a broken financial system, I can't see the logic due to the new variables every single day. I can't imagine how anyone can come to a conclusion about either policy because everyday the system is fluid and it will have to change. These policies cannot be locked and loaded because the earth is moving beneath our feet. I am not defending one over the other, I have an open mind. Believe it or not, despite the fact that I am a Democrat, I don't think more government is best. Our government is stupid, backwards and re-active. BUT, I see more government in the last days of the Bush Presidency, headed by a Republican Administration and a Republican Senate. We all agree that Congress spends money like an addict. I assume you know that no bill becomes law unless the Senate ratifies the bill. The Senate is Republican and has been since 1992. McCain has been in the Senate for 20 years. How can I trust his policies are presumptive to my best interests anymore than Obama's? Mind you, the House can have 100% Democrats, but the House is the lower chamber and cannot make a bill become law unless the Senate ratifies the bill to be signed by the President. This is our system of government. From my understanding of how government works and who has been in charge, what credibility would McCain have as a solution when he has been in the Senate and voted for the very thing we are railing against? Can you see my point? I would be interested in your response.