Obama Lie-O-Matic Tax Calculator

with 8 Comments

As a student of the tax code I clicked on a political ad recently by the Obama campaign asking me to get the facts about the tax savings under Obama versus under Romney. It took me to a quite impressive Barack Obama tax savings calculator where I could enter my family income, Filing Status and number of dependents and see what money each candidate might save me on my taxes.

Here are the results for an annual family income of $497,499 where it told me that Obama would save me $8,225 in taxes whereas Romney would save me $4,016:

The Obama Lie Machine at work

If I earn just one more dollar and have an annual family income of $497,500 BarakObama.com calculates an additional $70 in savings from Obama and an additional $28,094 in savings from Romney:

The Obama Lie Machine at work

It appears as though these saving hold through $997,499:

The Obama Lie Machine at work

At this point earning an additional dollar gains you an additional $209,232 in Romney tax savings:

The Obama Lie Machine at work

And now the calculator gets stuck again, this time permanently. Even if you earn $10 million you can’t seem to get any more Romney savings:

The Obama Lie Machine at work

There’s a term in the financial world for Internet sites like these and that term is “fraud.” It is one of the things that even the most radical libertarians believe should be against the law. That a well funded presidential campaign would mislead this way, have it pointed out, and then not remove or correct it is Chicago politics at its worst. That the media doesn’t make these type of lies an issue is a tragic failure of what used to be called journalism.

Please don’t try to justify the site as being mostly true or true in spirit. The site isn’t even that. The “number of dependents” slide is completely for show and doesn’t seem to affect anything. The “continued tax savings” doesn’t make any sense under any proposal which has been even slightly suggested by Obama. The “learn more” feature offers no explanation that would support any of the claims. These are not “simplifying assumptions” they are simply lies.

I appreciate a good debate of policy when facts and reason are used. But I don’t know what to do with automated lies scripted and told with a straight face. I would have to agree with economist Thomas Sowell who wrote in an Investor’s Business Daily article earlier this year entitled, “President Obama Smooth Player In Political Lying Game“:

One of the highly developed talents of President Barack Obama is the ability to say things that are demonstrably false, and make them sound not only plausible but inspiring. …

Now there are different kinds of liars. If we must have lying presidents of the United States, I prefer that they be like Richard Nixon. You could just look at him and tell that he was lying.

But Obama is much smoother. On this and on many other issues, you would have to know what the facts are to know that he is lying. He is obviously counting on the fact that, in this era of dumbed-down education, many people have no clue as to what the facts are.

He is also counting on something else — namely, that the pro-Obama media will not expose his lies.

My first thoughts when using the Obama Lie-O-Matic Tax Calculator was, assuming all the numbers were correct, to imagine how many employees a small business owner with $1 million of income could hire if they were taxed $245,551 less. I think they could hire at least 4 or 5 more employees.

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David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. In addition to his financial writing, David is a co-author of The Haunting of Bob Cratchit.

8 Responses

  1. Andrew Everett

    Interesting that there were zero specific examples of Obama lying. Whereas with Romney, we have bloggers like Steve Benen chronicling his daily mendacity. If the subject is lying, look to Rolls-Royce, um, I mean Romney-Ryan for unbelievable inability to tell the truth. This tool may be over-simplified and not totally inaccurate. But it pales in comparison to the daily falsehoods emanating out of the Romney camp.

    • Andrew Everett

      Link to the latest here: http://maddowblog.msnbc.com/_news/2012/08/17/13338337-chronicling-mitts-mendacity-vol-xxx

      With links at the end to the other 29 installments of continued untruths.

    • David John Marotta

      That politicians stretch the truth with spin or disagree about cause and effect I understand. But computing how much you will owe under different rules is not a fact there should be disagreement about.

      To say that someone who earns $497,499 will receive a $8,225 in continued tax savings under Obama’s plan but only $4,016 under Romney is pants-on-fire lying. If that were true, why is the President saying that those over $250,000 should pay more taxes under his plan?

      Also, to cap the savings of anyone earning more than $997,500 at $245,551 is mind boggling. If they are currently already paying $318,265 does this mean Obama will raise their taxes to $563,816? Why not just take it all? And if that is the savings for someone earning about a million, what would be the taxes for someone who’s small business had $10 million in profit?

      My post was really just trying to get people to realize what having such a progressive tax rate really means. But the Obama tax-o-matic calculator does more than just obscure the truth. It lies in a way that is fraudulent where it should be accurate.

      The article you quoted called many things Romney-lies that I think the economics supports. Just as examples:

      7. Romney added, “You see unlike President Obama, I won’t raise taxes on small business.”

      Obama has repeatedly cut taxes on small businesses — by some counts, 18 times — and if given a second term, his tax plan would have no effect on 97% of small businesses.

      Our family has eight business entities, but only one of them (the one which will be hit) is going to experience the coming tax-tsunami. it is also the only one with employees. It isn’t important how many businesses. Many people own a business entity for their part-time economic activity.

      The most accurate truth: Obama will raise taxes on 3% of the business entities, but those are the ones who actually employ people. Just like people, the top 3% probably represent the majority of the economic activity and employment. Romney, unlike Obama, won’t raise taxes on these important small businesses.

      My conclusion: #7 is NOT a Romney lie. At least I would agree with it.

      8. In an interview with Fortune magazine, Romney said the president’s stimulus measures “have not put Americans back to work.”

      Yes they have.

      Even if the private sector adds jobs, that doesn’t mean that the stimulus measures were the cause. We would have to go back and run the economy without the stimulus to determine which result produced a better job recovery.

      There is great evidence that stimulus money actually makes economic recovery more difficult. It is like pushing on a string when you need the string to be taut. The claim (and it is one I agree with and have written about) is that public sector spending competes with the private sector in numerous small ways.

      As to the facts about employment, , this recovery has been largely a jobless recovery. The country needs to add about 150,000 jobs every year because that many people are being added to workforce. Any less than this number is rising unemployment.

      My conclusion: #8 is not a Romney lie. The economy ultimately will recover. That is not in doubt. Millions of American’s very livelihood depends on them making their companies profitable. But I don’t think the stimulus plays a positive role in that process. In fact I think it plays a slight negative role.

      Many of the Romney-lies are from Romney’s statements of intent, “I will …” or “I will not…” to which Steve Benen retorts, “No he won’t.” or “Yes he will.” based on Benen’s own judgements about Romney’s honesty and integrity.

      I’m not going to make a judgement on those other than to say that every politician has to couch their agenda as giving away more goodies to get people to vote for them. And every politician tying to give away goodies is an object lesson in why a reduction in size and scope of government would improve the political climate. Putting greater power in the hands of the government is vote for that power to be used for special interest groups and against the freedom to choose for yourself.

      A lot depends on what the candidate intends to do. When Obama says his plan won’t raise taxes on any small businesses, but it will raise taxes on the largest 3% of incorporated businesses which represent the largest amount of economic activity and employment, at least I can make a judgement if I think this is a good idea or not.

  2. John Q,

    Excuse me, Mr. Marotta, but in what world is someone with almost a half million in earned income considered “middle class”? As for your claim that the dependents element of the calculator doesn’t even do anything, you’re just wrong. Enter an actual midde class income and adjust the dependents number and you’ll see that the number changes. I’ll be watching for your correction.

    • David John Marotta

      Greetings John Q,

      The world in which a half million in income is a small business owner. That doesn’t necessarily mean they are wealthy. There is a big difference between wealth and income. And as I wrote in “Which rich are you trying to tax?“, “Those productive small business owners with higher earnings are a different group from the ultra-wealthy with a higher net worth.”

      And the point I started out trying to use the calculator to illustrate was that the tax incidence of raising these rates will ultimately be born by the middle class no matter how much to try to tax the rich. Read, “Who Pays For Corporate Taxes?

      But back to a concrete example:

      I see that in the numbers below the ones in my example there is an effect to the number of dependents. I could not find any change in the numbers I was running for small business owners. Example: $50,000 and two dependents.

      The calculator says that Obama provided a $3,600 tax savings during Obama’s first term and will provide $2,168 in continued tax savings next year if Congress will only act on a proposal. It also says that there will be a tax increase for this family of $641 under Romney.

      But these are the same numbers for anyone with an income anywhere between $47,500 and $72,499.

      Can you give any reasonable accounting of this?

  3. Phil

    Absolutely amazing attempt at defining black = white.

    If you had TAXABLE income of $497,499 in 2013, you were rich/wealthy in 2013. You (almost certainly) were in the top 2% of all “tax filing units.” (according to the WSJ).

    Being “a small business owner” doesn’t, somehow, magically lower the amount of money you made (as taxable income) that year.

    You are not in the middle class; your insistence that you are is, well, wrong.

    • David John Marotta

      Greetings Phil,

      >You are not in the middle class; your insistence that you are is, well, wrong.

      Read carefully, I did not say that someone earning $497,499 is in the middle class. I certainly did not “insist” that they are. Your incredulity is due to a lack of understanding, intentional or unintentional.

      I have not said that those with taxable income of $497,499 are middle class. I’m assuming that you are defining “class” as income. Alternate definitions would be “net worth” or “consumption”. Being high in one of these does not necessarily mean being high in the other two. There is a difference between being productive (income), being wealthy (net worth) and living rich (lavish life-style consumption).

      You can be in the top 1% of income just by selling a house in California. Or you can have a net worth of over $10 million with very little in income.

      So imagine a small business owner who is trying to expand their business. They open a sandwich shop and start employing people. And then they are trying to get $500,000 together so they can open another sandwich shop and employee several more people. In order to get that capital together they have to get profits out of the first business in order to buy another shop. But first they have to pay income taxes on the money. Sure at some point well in the future they might start getting to depreciate their investment, but currently they have to get after tax money to grow their business. The high tax rate which follows as a result of flowing profit onto their personal taxes makes that growth very difficult.

      That small business owner is productive, but does not have a high net worth neither do they have a lavish lifestyle of consumption.

      You can call them ‘rich’ or ‘upper class’ but it may just be an economic slur when you do.

      And when you choose to tax the most productive members of society, the tax incidence falls mostly as society’s loss.

  4. Luis

    I have to say that Obama’s tax calculator is mostly false and therefore a lie. It’s not like anyone can protect Obama on every occasion. What is the purpose in that, to create a team competition?