Sunday, July 20, 2008

McCain and Obama Economics

Listening to both McCain and Obama the issue is economics. From what I hear both McCain and Obama refer to economics in terms of energy costs, universal health coverage, jobs, college and more.

Obama wants to slap a windfall profits tax on oil companies such as Exxon-Mobil who made $40 Billion in profits while the Federal Government was paid over $100 Billion. Clinton voted for Medicare’s Prescription Health coverage. Now Medicare is projected to run out of money in 2018. Both want all people to go to college. All this while the budget deficits are high, social security is projected to run out of money in 2041, Medicare cutting reimbursement to doctors, oil hitting $145 per barrel, property tax reform in Indiana, falling dollar, high trade deficits and an economic stimulus package (tax rebate of $600 per worker/$300 per dependent).

I need to take a deep breath and relax. What is going on here? Let us follow the dollar and see where it takes us. When I work 40 hours, I get paid x dollars. Out of this x dollars, Federal taxing authorities take the following: Federal Income Taxes, FICA taxes, State taxes and local taxes. The majority of workers pay more in FICA taxes (Social Security and Medicare) than any other tax. The FICA tax is 15.3% of wages. Many say the worker really only pays 7.65% (half) because the employer is required to contribute the other 7.65% on behalf of the employee. The worker actually pays the full amount. The reason is very simple, the company increases the price of goods and services to cover all costs. You pay it when you buy goods and services. As the FICA tax increases, the cost of doing business increases. Either your wages are lower or we as consumers pay more. Either way you want to look at it, we the worker are paying the full amount of the tax.

What happens when the cost of doing business increases to a point where the company cannot make a profit, it closes its door? As taxes increase, the cost of doing business increases. This means those countries that have lower taxes create an environment that is cheaper for companies to operate.

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NBC-33 Debate poll results from 2002