McCain vs Obama - Sometimes, it's all about the MONEY

Earlier this year, a childhood friend from Pennsylvania told me about his support for Barack Obama. He left no doubt in my mind that he was a firm believer like millions of Americans and practically everyone I encounter in Europe.

After John McCain’s Vice Presidential choice, Sarah Palin took America and the world by storm, I wondered if he was impacted like much of the country so I wrote an email to see if he was still an Obama man. Call it a premonition as I thought his opinion might have been altered; not necessarily because of the public relations brilliance of Palin. When I didn't hear from him promptly as expected, I was left wondering.

Last week, he sent me the following email:

"I was for Obama all the way. But here is my dilemma… he stated he will raise capital gains tax to 30% and more, McCain just said he will lower it to 7.5% - this will impact me directly by $70 to $80 K next year alone - so he is no longer my guy. Let me say that again – I will have to pay $80 K more in taxes next year…on one of my projects alone. That is more than most people make a year. So how could I vote for this guy – and many - many of my friends – by accepting this? My wife and I were for him until last week or so – but now it seems like a re-distribution of wealth. McCain-Palin is the way to go as I see it Now. CHANGE – my mind – or give me a reason better than $80 K why I should change my opinion".

Was I shocked by his abrupt change of heart? No but very surprised.

Was I disappointed by his abrupt change of heart? Yes, although not for his choice of McCain; the disappointment emanated from his "one issue" reason for McCain especially since it seems to be all about the money and less about what is good for America.

Keep in mind that this individual is a good man and dedicated family person who I have known for over 30 years. He is smart, interesting and enjoyable to be around along with having the rare ability to embrace and be comfortable around all types of people. In addition, he has traveled outside of America unlike the vast majority of USA citizens. I was a groomsman at his wedding and his friendship has been and will continue to be important to me.

Below is my open letter to him.

Happy Gswede Sunday!
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Dear Friend:

Whether you vote for Obama or McCain is not the issue but I am disappointed in your approach as money seems to be the fuel for your decision. I realize we must take care of our families first as all good things in life start from a strong family unit. Right now, many families are hurting across America; much more than yours or mine abroad. How they got there is not so important at this point; what is important is this question. "What are we going to do as a nation in this election to help out our fellow citizens"?

You have made your money by being a smart and successful businessman and deserve to earn and keep as much as you can. What you may not know is those capital gains you mention are not so black and white meaning your losses could be less than what you expect. Information about this topic will be forthcoming.

I implore you to think seriously about who will be the best President for America 1st and the World 2nd; then base your decision on elements that support that criteria rather than money. Currently, our country is in a rough situation and could spiral into unimaginable chaos in the coming years. We have already experienced a taste of it in the last few weeks of the financial meltdown and you must feel the pain rampaging through our great country. My heart is heavy in Sweden.

Your life has been a shining example of the American dream and you have lived up to the wonderful values that your mother and father instilled in you including helping others and volunteering. Don't you want the same opportunity for your children? I know very few men as decent and loving as you. And your choice of a wife couldn't have been better! How can you discard all your blessings and base your vote for president on one issue that helps no one but your family?

Here are a few thoughts to ponder on who America needs as its next President:

-- We need a president who is respected AT HOME (America).

-- We need a strategic president who thinks about the issues surrounding America first and foremost followed closely by our neighbors around the world.

-- We need a president who is RESPECTED around the world and can make the AMERICAN BRAND stronger outside of our borders. As an American living abroad, I want cultures throughout the world to respect the leader of our country.

-- We need a president with intellectual or creative curiosity who has the ability to take the issues, think seriously about them and deliver that message to us so we know that careful thought has been applied.

-- We need a confident president who won't be detached or defensive.

-- We need a president who is not afraid to make the tough decision or call his own shots even if they turn out to be wrong.

-- We need a president with sound judgment who can decisively lead by playing a major role in avoiding or steering America through a crisis such as the financial implosion, Iraq war or tragedies like Katrina.

--We need a president who at the very least can be commanding and comforting in a crisis much like former New York City Mayor Rudy Giuliani after September 11.

--We need a president who consistently puts family first, leads our nation, comforts us, inspires us and make us proud.

As you know, the last 8 years have not exactly been kind to America. They may have been good to you, me and most of our friends but far too many of our fellow Americans are in dire straights. They need and deserve our help in electing the best man to lead our nation during this critical period by thinking about the aforementioned criteria or at least more than one issue.

I didn't want my message to be your only input so I shared your words with a close network of friends and readers of my blog (Obama and McCain supporters in America and abroad) and the response was swift and lively. The range of emotions was all over the map including anger, disbelief, not surprised, factual, agreeable, disappointment and calm eloquence. The quality and effort of the emails genuinely moved me and displayed the passion that our Presidential election has inspired.

Below you will find a few of those responses (all Americans) that I hope will give you some food for thought. The first should make an impression as the writer lives a short ten minute drive from your house.

One thing any caring or sincere person should believe is this.....America needs a change or new direction. If you think McCain is that change, vote for him. If you think (like you did previously) Obama is the new direction, vote for him. It is easily one of the most important choices of our lifetime. The choice will always be respected if it is properly evaluated.

And remember, if we make the wrong choice as a nation; that mistake could cost America, its families and the world years upon years of grueling pain and put your family in a position where the money you might lose from capital gains could be the least of your worries.

I wish you and your family well.

Warm Regards,

George
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1st - From Pennsylvania:

It is tempting to base a vote on one criterion. In fact, I would argue most people choose in this way since it's the easiest way to select things when accounting for the multitude of choices takes patience and study. Unfortunately, for the single issue voters of 2000 and 2004, like those who were pro-abortion and liked George Bush, they now have had to face very real second thoughts. For example, how many of those voters sent kids to Iraq only to see them not return? Or how about those who invested heavily in the stock of Washington Mutual or Lehman, only to have their portfolios shrink to nothing? If a more thorough examination of Bush from the perspective of his pre-emptive war view or his anti-regulatory stance had been added to his other views, I suggest his support would have been greatly reduced. Now I know that 80k sounds like a lot of money, and it is. But I would argue that life is more than short term profits and losses. Life is also about the hope for a better future, a more secure retirement, and more affordable health care and higher education costs.

I would argue that the savings they believe they'll yield in capital gains will be more than chewed up if McCain and the Republicans begin taxing health care benefits. If education reform doesn't take hold, and soon, the cost of a secondary education will be unattainable for the majority of Americans. In addition, with borrowing costs going up or worse, not available due to the credit market meltdown, students and families won't even have the chance to go on to college. Make no mistake, college is an investment in the long-term future of America. If you gut this precious American asset, capital gains taxes will be thing of the good old days.

Two ideas at the base of Obama's economic philosophy:

First

Reduce Income Inequality

"For decades, America has been victim to an anti-tax sentiment that has led to tax cuts that favor wealth, not work. And for decades, the gaps in wealth in this country have grown wider, while the costs to working people have increased. This year alone, the average person in the wealthiest 1 percent of Americans will receive more than $55,000 from the Bush tax cuts, while the average person in the bottom 20 percent of Americans will get about $70." Obama Tax Plan

Second

Raise capital gains taxes for fairness, not revenue.

Q: You favor an increase in the capital gains tax, saying, "I certainly would not go above what existed under Bill Clinton, which was 28%." It's now 15%. That's almost a doubling if you went to 28%. Bill Clinton dropped the capital gains tax to 20%, then George Bush has taken it down to 15%. And in each instance, when the rate dropped, revenues from the tax increased. And in the 1980s, when the tax was increased to 28%, the revenues went down.

A: What I've said is that I would look at raising the capital gains tax for purposes of fairness. The top 50 hedge fund managers made $29 billion last year--$29 billion for 50 individuals. Those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That's not fair.

Q: But history shows that when you drop the capital gains tax, the revenues go up.

A: Well, that might happen or it might not. It depends on what's happening on Wall Street and how business is going.

Source: 2008 Philadelphia primary debate, on eve of PA primary Apr 16, 2008

The final word. Tax policies vary by President. Many of us have benefited handsomely over the past few years from increased stock valuations and real estate transactions that were, it turned out, too good to be true. As Obama stated on April 16, 2008, "it depends (capital gains) on Wall Street and how business is going". For a guy who many suggest is not ready or too green, it's interesting that he could be this much on point six full months before this unfortunate scenario of Wall Street's demise surfaced. Hearing that McCain wants to drop the capital gains rate is nothing more than saying he wants to reduce the tax rates on the top 1%. This has helped America? Clinton raised taxes in 1992 and used the funds to pay down the deficit. This reduced US government borrowing in the capital markets thereby providing money to Main Street for the capital it needed to invest in America. Finally, how many would now say that it was a good thing for America that we were able to flip houses at will only to now find some of the houses we thought we could flip still sitting without buyers and without a prospect for buyers in the near future? Heck, McCain wants to give money to homeowners who are upside down on their mortgages because "the devaluation of their homes is affecting their neighbors." This is a sensible McCain solution? Business is cyclical as is life. Throwing the baby out with the bath water, as your friend suggests he would do with Obama, is too high of a price to pay - even for a few extra dollars.
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2nd - From New York City:

Here is the sad thing about Obama's plan – lowering the capital gains tax rate has added money to the treasury. Raising it will not only effect your friend the way he says, but it will decrease the amount of money to pay for these billions and billions of new obligations.

Why do it one may ask? – because it gets votes from people it doesn't affect – 75% of the population that is always looking to tear down the successful and look for something for nothing.
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3rd - From an American in Sweden:

That's pretty simple. McCain is running off of the "proven" republican ticket but with the current financial crisis at hand there are a few facts that have to be considered:

1. taxes will be raised no matter who is in office.

2. Confidence in the US dollar will improve immediately with Obama taking office due to the resurgence of the American Dream.

3. The Republican "lower taxes policy" has ALWAYS led to worst overall financial situations while the Dems "more taxes and government intervention" has ALWAYS lead to the better times for everyone.

4. McCain has proven his lack of leadership qualities and inability to stay on message mix that with a Democratic congress and you have the perfect mixture for a lame duck -- not to mention he'll lack confidence since the Bradley Effect will be in play if he wins at this stage.

5. Palin brings in yet another round of neoconservatives hell bent on pushing their proven-to-fail agendas which will eventually bog down the White House's ability to lead and god forbid he dies in office...

6. If all else fails higher taxes for a few years compared to the long term effects of a McCain presidency should be the deciding factor for sane people.
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4th - From Maryland:

Sadly, we don't all develop the same way at the same time, or along the same lines. He has been blessed to be able to earn a living at a level which most American's will quite literally NEVER SEE (Amazingly, the same can be said for both you and me). Yet, your friend has become so comfortable in this situation that he seems to be taking it for granted. If it's really just about the money there may be no argument which will convince him that McCain is a bad choice. Money is a strong motivator when you allow yourself to get lost in the pursuit of materialism. But McCain can't be serious or taken seriously when he says he'll cut taxes. We are spending $10,000,000,000 per month on the war in Iraq. We have an $11,000,000,000,000 national debt. Our infrastructure is in disrepair and social security is in jeopardy. We spend the largest portion of our national budget on health care through Medicare and Medicaid, and that percentage is not going to get smaller for at least another 20 years as the last of the baby-boomers hit retirement age. Given our policy shift and McCain's' support of the Bush Doctrine, we'll need to increase defense spending as we gear-up for pre-emptive strikes against anyone we perceive as enemies.

But we are still comfortable at this point and the politicians who are desperate for our votes know we are suckers for comfort. Because comfort feels good and we don't want to change. When some of us get comfortable in our situation we may tend to forget that not every one is similarly situated. We may also feel that those who have not been as fortunate as us are at fault for their situation and perhaps don't deserve our respect, our compassion or our assistance. We may forget the basic tenets we were raised with or the precepts we learned later in life about caring through sharing or about realizing that those to whom much is given, much is expected. We may forget that we are all children of God and as such we are all truly our brothers' keepers. We may forget that we have been blessed to be part of a nation and a society so blessedly abundant.

Recent stats from Dept of Labor and the Census bureau show that in 2007 the median household income was $50.2K. That's for the entire household! By the way, the average household has 1.8 salary earners and 2.3 people in it. You'll see variances in these numbers depending on where you look, but they are all in the same range. The average income for a household in the U.S. in 2007 was $53K. Let that settle in for a moment and think about what it means. Compare that to the $70-$80K your friend may have to pay in taxes. Doesn't that mean he earns at least 3 to 4 times that much in before-taxes base salary? Does that not give you enough to live so comfortably that even while sending two kids to college, you can afford a home in a safe and clean neighborhood? How much does one have to earn to not care about how much one is being taxed? Let me put this another way: Understanding the differences in the candidates, isn't it worth the extra increase in taxes to have our infrastructure and schools refurbished? What about our standing in the world, or the way in which America is perceived? If taxes are cut can we really wage war on two fronts? If we cut taxes, wage simultaneous wars, keep social security afloat, continue to fund Medicare and Medicaid and increase defense spending can we still rebuild our infrastructure while paying more for gas? Do you see the dichotomy in McCain's plans? If we are thinking clearly, can we take anything McCain says seriously? Remember George H.W. Bush's pledge of "Read my lips: No new taxes!?" Remember how his world crumbled when he couldn't deliver that pledge and had to eat his words as he raised taxes?

All of that aside, a vote for Obama should be because he's the better candidate and not because McCain is a daft old man. Obama is asking Americans to step up and make some sacrifices for the good of the nation and for the good of mankind. Our soldiers, marines, sailors and airmen should not have to bear the burden alone. We too can make sacrifices of some sort. $80K in taxes is a small price compared to losing ones' limbs, eyesight or life. We can finally be part of a generation that makes a difference. We can be the generation that finally allows America to live up to her promise. We can be the generation whose grandchildren can honestly feel pride when they read about us in their history textbooks. I want to be a part of the generation that says instead of being a part of history, we made history. I refuse to stand on the sidelines and let McCain cruise into office without a fight. I don't want to have to look my son and grandchildren in the eye and say that when that pivotal moment in history called, I refused to answer. In this election we have two distinct choices: We can look like the generations that blew it during reconstruction and the birth of Jim Crow or we can follow the example of the generations that fought WWII or marched with the freedom fighters of the sixties. I know which side I'm choosing and I don't care about the cost.

Peace and blessings.
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5th - From an American in Sweden:

If it’s just about money etc .... You can tell him this: There are more people without financial and health care means today then ever before since the great depression. The other fact is that McCain's 90% support for Bush policies are a direct result too! I respect a man who does what’s best for his family BUT that won't make a difference in the bigger perspective in a global economy.

If I were him I'd start thinking globally by spreading 30% of my investments out into new markets i.e. emerging economies and realize that at the end of the day there are more people without then there are with livable means. He has the right to vote however he likes but it won't change much because it’s more than likely he will be reversely effected anyways!
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6th - From Massachusetts:

Ask him how much he's going to make when we're at war with three or four different countries, people are in the streets without a pot to piss in, and his assets investments are vaporating. How much will he make from his projects, then? Your friend is looking at the small picture just like the banks, investment firms and Bush did. He's about getting his. He was never for Barack, he was for himself. The sooner you and he admit that, the clearer your friendship will be.

Sorry to be so harsh, but at a time when the greed of a few have touched the lives of so many who simply go to work and do the best they can within the parameters of moral fortitude, it's hard to hear some self-centered, short-sighted, (I'll refrain from what I want to call him because he's a friend of yours) person rationalize that he'll vote for a candidate who's straight-up admitting he has no clue how to fix the economy because he's potentially gonna save some money despite the fact that it would devastate the country as a whole.

That's just unbelievable to me, G.
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7th - From an American in Sweden:

Don't think I can help. If he's a one issue voter, and less capital gains tax is his issue, then the R's are right. If he thinks the government should pay for wars, social security, national security, crime fighting, disaster relief, etc., then he should consider the Democrats, who in recent history have proven to be the more fiscally responsible party, while still funding critical government services. As Justice Oliver Wendell Holmes said: "I like paying taxes. With them I buy civilization."
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8th - From New York City:

G,

First, I love challenges like this. How I started to go about tackling this issue is to find out one thing: What are the facts?

Your friend's statement demonstrates a wild disparity in the figures 30% vs. 7.5%. This incurs some suspicion.

Firstly, directly from the IRS, here are the facts:

The first diagram shows that in 2006 only 12.9% of all tax returns produced capital gains.

The second diagram shows distribution of capital gains across the entire income spectrum in 2006.

The third diagram shows who would pay the most should capital gains increase. Basically more than $8 in $10 in capital gains goes to those making more than $200,000 year - these are the people who acquire the most capital gains income.

I don't know where your friend's numbers come from, but I'll assume that they are generated from Obama's proposed highest (which includes no deductions), versus McCains calculated lowest number (that person at the $200,000 income with all possible deductions).

Now, here's the kicker. Below info (click on link) cited from Wikipedia sourced from the IRS.

Capital gains tax in the United States

Year 2008 income brackets and tax rates

http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States

Short-term capital gains are taxed as ordinary income rates as listed above. Long-term capital gains have lower rates corresponding to an individual's marginal ordinary income tax rate, with special rates for a variety of capital goods.

So, as you can see, the capital gains tax is already above 30% under the George W. Bush administration in both Short and Long Term Capital Gains!

Both Candidates use the current capital gains figure of 15% but that's the figure for middle income. In other words under the McCain to cut capital gains (more accurately from 15% to 7.5%), we would take the table and slide it down below the bottom rate (currently 10%). If we subtract the difference of 2.5% (keep in mind the other tables above - the proportions will be the same) we get a McCain real tax decrease to 32.5% for the top bracket.

So, my conclusion base upon the facts are this:

If you make more than single and make more than $357,000 the max you'll save 2.5% before deductions under McCain's plan.

Since there are a gazillion types of taxes that the treasury collects, Capital gains should not be the only tax increase/decrease to be concerned with. I have attached a link to the following graphic from the Washington Post comparing the two tax plans base on family income.

http://www.washingtonpost.com/wp-dyn/content/story/2008/06/09/ST2008060900950.html


An interesting statue of contemplation (an admirable trait in any leader) in the small town of Borås, Sweden