NCPA - National Center for Policy Analysis

OBAMA'S 95 PERCENT ILLUSION

October 13, 2008

One of Barack Obama's most potent campaign claims is that he'll cut taxes for no less than 95 percent of "working families."  It's a clever pitch, because it lets him pose as a middle-class tax cutter while disguising that he's also proposing one of the largest tax increases ever on the other 5 percent.  But how does he conjure this miracle, especially since more than a third of all Americans already pay no income taxes at all?  There are several sleights of hand, but the most creative is to redefine the meaning of "tax cut," says the Wall Street Journal.

For the Obama Democrats, a tax cut is no longer letting you keep more of what you earn.  In their lexicon, a tax cut includes tens of billions of dollars in government handouts that are disguised by the phrase "tax credit."  Obama is proposing to create or expand no fewer than seven such credits for individuals:

  • A $500 tax credit ($1,000 a couple) to "make work pay" that phases out at income of $75,000 for individuals and $150,000 per couple.
  • A $4,000 tax credit for college tuition.
  • A 10 percent mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).
  • A "savings" tax credit of 50 percent up to $1,000.
  • An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.
  • A child care credit of 50 percent up to $6,000 of expenses a year.
  • A "clean car" tax credit of up to $7,000 on the purchase of certain vehicles.

Here's the political catch.  All but the clean car credit would be "refundable," which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability.  In other words, they are an income transfer -- a federal check -- from taxpayers to nontaxpayers.  Once upon a time we called this "welfare," or in George McGovern's 1972 campaign a "Demogrant."  Obama's genius is to call it a tax cut, says the Journal.

Source: Editorial, "Obama's 95% Illusion; It depends on what the meaning of 'tax cut' is," Wall Street Journal, October 13, 2008.

For text:

http://online.wsj.com/article/SB122385651698727257.html 

 

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