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While President Obama heading to the swing state of Iowa tomorrow to further -- -- -- to extend tax cuts for only the middle class my next guest says the president's call for higher taxes.
No matter who is impacted if economic malpractice.
Scott Hodge president of the Tax Foundation joins me now Scott welcome back the -- it's always a pleasure to see you.
What did you during his speech today.
Well that's exactly right it is economic malpractice because -- tax increases would hit the most successful small businesses and America.
And what we find is that today there's actually more business income is tax -- individual tax code.
Through the because so many business owners are the sole -- is there -- sub chapter S corporations.
And on the majority of their private business income is so would be affected by these higher taxes that mr.
Scott the president disputes that he says it's a very small proportion of small businesses that would impact in what do you know that the president doesn't.
-- -- -- Well what he's -- -- plane was statistics he's saying only 3% of small businesses will be affected.
The real issue here the real economic issue is how much small business income would be impacted and that's where we see about two thirds of all this private business income.
Would be affected by is higher tax rates this will be one of the highest.
Tax increases on private businesses in modern history.
Wow well that's something -- -- -- help us analyze some of that claims that the president made about his track record here's the president.
I've cut middle class taxes.
I've been -- -- 3600.
Dollars for the typical middle class -- and I've cut taxes for small business owners eighteen times.
-- rights that would -- it stated that cutting middle class taxes by 3600 dollars eighteen tax cuts for small business true or false.
Well -- they're sort of half -- because most of those are gimmicks and short term stimulus.
Tax cuts that are really just tax giveaways.
Such -- up replacing the windows on your house fine hybrid vehicle or what he called his making work pay credit.
Which half of that money went to people who paid no income taxes anyway they were essentially give away from the IRS this is really gimmick tax policy.
Rather than the real kind of tax policy that lead to long term economic growth.
Well and then immediately -- -- rates and the main plank of what it was proposing today is again.
One year change another gimmick it's it's not solving the problem.
Let's take a look at the battle over tax rates for just a second and show people what we're talking about.
Under Obama the top tax rate would be some 39 point 6% nearly 40% it's currently at 35.
Ronnie -- drive -- down to 28 and what we're looking at dividend tax rates or capital gains tax rates.
The story is -- saying it seems that Obama is really targeting people with a lot of money people that some people in this country would consider wealthy others would not.
What do you make of the way he wants to shift.
The tax burden.
Well these are release a success taxes these -- on.
Tax increases on people who've been successful either through investing or building a new business.
And this is not not the kind of tax policy that's the only to higher economic growth and just the contrary.
This is a kind of tax policy that we're seeing in places like France where they're trying to punish the most successful members of their society.
In order to re distribute that either to the bureaucracy.
Or to people who pay no income taxes either way it's redistribution.
Through the tax system against the waited too was suffocate.
An economy not to grow it.
Well and certainly you know this economy has been able to turn around you see this sluggish growth -- -- -- real penalty for the very people who could help solve the problem.
Blitzer for a second to tax me get in the end of the year and now winner Obama gets what he wants or not you still have a ton of taxes coming on board.
How can people prepare for this.
Well it's a very scary time because we simply do not know what's gonna happen until really after the election.
When congress and the White House are gonna have to figure out a lame duck session whether to extend these tax cuts are not if they don't reach an agreement all these tax rates go up.
So if you are -- afraid of what's gonna happen.
Move a lot of that in come out of 2013.
Into this year for instance.
That you may want to realize some capital gains rather than face those higher tax rates next year start doing a lot of planning this.
Even today -- charitable giving should be delayed why.
Well -- because you'll get -- more value out of charitable giving next year when tax rates are higher if they are higher.
Then if you were to take those so charitable giving to today we're tax rates are lower.
That the value a charitable gift is much in the greater -- tax rates are higher.
So you're gonna have to play a little games here with -- tax code taking income today -- -- tax for last.
Giving money to charity next year we're -- be of greater value.
Well Scott thanks I didn't think there was any planning at all you -- do I guess -- some you can -- at a time thanks for helping us out today we appreciate your time.
You -- thank you.