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Cost of Living Increase Under Obama’s Tax Increases

Reframing the economic debate with how product costs will effect the bottom line for families

As I walked down the grocery isle this weekend I began to look at all the brand names of products on the shelf and I it occurred to me that almost all of these companies would be those that make over the $250,000.00 marker that Obama has laid out in his tax increases.

With a family of four to support, my wife’s and my cart was filled with groceries typical of most families. We had milk, bread, eggs, lunch meat, various dinner type meats, fruit, household cleaning products, paper towels etc…. you get the picture. When we went to the register, the bill came out to $160.00 dollars. I asked my wife what we typically spend each “week” on groceries, and she told me around $190.00 weekly on food.

I did some research and learned that our family fell pretty much into the average for what a family of four spends on their groceries per month here in Southern California. Doing a little figuring, it means that with 52 weeks in a year, we spend on average $9980.00 dollars for groceries a year.

So what is Obama’s plans exactly for increasing taxes on small businesses making over $250,000.00?

GROVER G. NORQUIST http://www.politico.com/news/stories/0708/11670.html

“What type of tax rate are we talking about? Currently, S corporations face a top tax rate of 35 percent, while sole proprietors and general partners face a tax rate of 37.9 percent (since they’re responsible for paying both income tax and the Medicare component of the payroll tax).

Under Obama’s plan to let the scheduled 2011 tax rate hikes occur, and his plan to raise the self-employment tax on those making more than $250,000, the S corporation rate would rise from 35 percent to 39.6 percent. The sole proprietor and partner rate would rise from 37.9 percent all the way up to a staggering 50.3 percent. Many Democrats in Congress have proposed making all small businesses (including S corporations) pay this 50-plus percent rate.

Ok, so S corporations would face a 4.6 percent tax increase, and sole proprietor/partner companies would face 12.1 increase.

If the costs to a single company rise by a percentage for whatever reason, that company has to adjust its pricing model in order to continue to stay in business and still make a profit. If it is found that they cannot compete in the marketplace with other competitors, it is likely they will go out of business. However, if costs rise for all companies across the board, like a tax increase would impose, then it would force all businesses to readjust their pricing accordingly causing a net effect that prices of products will go up.

So let’s take what I spend on groceries per year and apply this.

$9980.00 X 4.6% = $459.08

$9980.00 X 12.1% = $1207.58

Now let’s go over to www.Obamataxcut.comFill out the form as follows:

Filling status: married – two earnerNumber of Dependants: 2Closest Adjusted Gross Income: $75k

(or put in your own numbers and use your own yearly grocery cost of living expenses)

Results are according to this website is I will get:

$980.92 back in income taxes under Obama’s plan

$801.59 back in income taxes under McCain’s plan

However, since McCain’s plan doesn’t increase taxes on companies, there is no increase to product cost for companies. So I get to actually keep all of my income tax return under McCain’s plan. If we take into account what I am going to have to pay in increases for products at the store on a weekly basis I would have to subtract the product increase.

If I get $980.92 and subtract the 4.6% tax/product cost increase I only end up with $521.84

If I get $980.02 and subtract the 12.1% tax/product cost increase I end up PAYING $227.56 MORE!

When we talk about the economy, we are not just talking about taxes, we also have to take into consideration how taxes will affect the cost of living. When this is done, it is clear that though Obama may claim that people under the $250,000.00 will get a tax cut, what he doesn’t tell you is that this cut will be rendered mute and in many case will end up making families paying more due the higher cost of living because of product cost increases.

So when we talk about the economy, we need to start including “The cost of Living increases” that families will face. If all we do is talk about how this will effect businesses, or if we stop the discussion there, it leaves a disconnect to those sitting around the kitchen table. By showing how the cost of living for families will increase due to product cost increases under Obamam’s tax plan, it will make it clear why Obama’s tax increases will affect directly their pocket book.

I think if we used “Cost of Living Increases” it would reframe the debate on terms that most Americans can understand.

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