Obama's tax cut for 95% of Americans is an illusion

[DixieBelle]

One of Barack Obama's most potent campaign claims is that he'll cut taxes for no less than 95% of "working families." He's even promising to cut taxes enough that the government's tax share of GDP will be no more than 18.2% -- which is lower than it is today.

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%. 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." ...

Mr. Obama is proposing to create or expand no fewer than seven [tax] 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% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).
A "savings" tax credit of 50% 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% 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. ...

Because Mr. Obama's tax credits are phased out as incomes rise, they impose a huge "marginal" tax rate increase on low-income workers. The marginal tax rate refers to the rate on the next dollar of income earned. As the nearby chart illustrates, the marginal rate for millions of low- and middle-income workers would spike as they earn more income. ...   

One mystery -- among many -- of the McCain campaign is why it has allowed Mr. Obama's 95% illusion to go unanswered.
http://taxprof.typepad.com/taxprof_blog/2008/10/wsj-obamas-tax.html

chart at link

[Chris_]

That plumber dude today did more damage to the messiahnfuhrer in a few minutes than MxCain has in months.

[paladin0]

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. ...

They had Obama's financial advisor on FOX today and he claimed that while these people didn't pay income taxes, they still paid payroll taxes, therefore they are tax payers and deserve a tax refund. Needless to say they failed to mention that those funds are for Social Security.

Paladin0

[Jim]

And its very easy to miss any or all of those seven.

I also cannot understand why McCain does not address Obama's claims that 100,000 families would get no break given this graphic from the WaPo of all places.

[USA4ME]

He's lying, that's been more than obvious.

Should he get in, everyone's tax rate will be raised.  His followers will claim he had no choice given the last 8 years, which is to be expected of cult members.  Other people who believed him and were fooled won't be so forgiving.

.

[DumbAss Tanker]

It's funny how Democrats can't seem to make the connection between off-shoring with resultant job losses on one hand, and strengthening union power, raising benefit requirements, and increasing corporate taxes on the other.