The Wall Street Journal has a great analysis of Barack Obama’s “tax cut” proposals today. The Journal’s analysis should come as a surprise to anyone… In short Obama “tax cuts” are 95% illusion.
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.”
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.” Mr. Obama is proposing to create or expand no fewer than seven such credits for individuals:
As an aside take a look at the Tax Policy Center’s report on Effective Marginal Tax Rates under each of the candidates plans… It’s a rather dry read but the bottom line is:
Overall, because it would extend all of the individual income tax components of the 2001–06 cuts and increase the dependent exemption, the McCain plan would lower the average EMTR for all households slightly relative to a tax cuts extended baseline and significantly compared with current law.