And they said George Bush had fuzzy math!

I've been reading with amazement Obama's plan to tax the wealthy to pay for health care. Here's how part of his plan works:

Those making $250,000 or more would have their itemized deductions frozen. If they are in the 35% bracket, and they have $10,000 in itemized deductions, that would amount to a savings on their tax bill of $3,500 ($10,000 x .35). Under Obama's plan, though, they would only get to deduct as if they were in the 28% bracket or $2,800. In other words, you don't get a full dollar for your deductions. Obama says this is only fair -- it is not right for "high-income people to get a bigger tax break than middle-income people for claiming the same deductions."

What backwards thinking! Does he think we are all idiots? They are not getting a bigger tax break -- their tax rate is higher to begin with. What he is saying is that the wealthy's deduction dollars are of less value than their taxable dollars. Let's break it down using these general examples and analyze it to see if these people are, indeed, getting a bigger tax break.

As it stands now, Joe Wealthy makes $250,000 a year and is in the 35% bracket. His tax bill is $87,500. But Joe has $10,000 in deductions. That means he will pay tax on only $240,000 a year, or $84,000. Joe has saved $3,500 on his tax bill making his effective tax rate 33.6%. Joe's tax rate dropped .4%.

Joe's neighbor, Jim Notaswealthy, makes $150,000 a year and is in the 28% bracket. His tax bill is $42,000. But Jim also has $10,000 in deductions, so he will pay on only $140,000. His tax bill is now $39,200. Jim has saved $2,800. His effective tax rate is now 26.13%. Jim's tax rate dropped .67%.

Which one got the better tax break? Looks to me like Jim did. Now let's see what happens to Joe under Obama's new plan.

Joe may have $10,000 in deductions, but he will be able to count only $7,200 of them, because Obama plans to freeze his deductions to the 28% bracket. That means Jim will now pay tax on $242,800 -- a total of $84,980. That makes his effective tax rate 33.99%. His deductions will have afforded him only a .31% savings. So Jim's deductions are worth more than twice as much to him as Joe's are.

If that's all too complicated, look at it this way. Macy's is having a 10% off sale. You and your shopping buddy decide to take advantage and are there when the doors open. You find a really cute blouse marked $50. Your friend finds what she likes for $30. When you check out, your friend gets her $30 blouse for $27. When the cashier rings up $47 for your blouse, you remind her that it's a 10% sale -- your blouse should be $45. "Oh, no," she says. "It's not fair for you to get a bigger discount than your friend." That's how Obama is treating the taxpayers -- one is allowed to deduct a percentage, and the other's deduction is limited to a dollar amount. They are not the same thing. And that is what's unfair! (And I haven't even mentioned that Obama plans to raise Joe's rate to more than 39% to begin with).

Well, this all doesn't bother me any -- I don't make $250,000. But remember, Obama started out in his campaign not raising taxes on anyone who made more than $400,000. Then it kept sliding. He still has three years and eleven months to get down to you!

"Health care tied to tax on rich." The Dallas Morning News; February 26, 2009; p. 1A.