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Obama’s Tax Deceptions
Obama is unable to tell the truth about his own tax plan.


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Barack Obama famously claims, “I’ll give a tax break to 95% of workers and their families.” The Obama team never explained that figure, because they made it up. They always cite the friendly Tax Policy Center (TPC), when it suits their purposes, but not this time. That is because the Tax Policy Center concludes that under Obama’s plan, “about 81 percent of households would owe less tax while only [only?] about 10 percent would owe more.” Compared with current tax policy, says the TPC “those in the top fifth of the income distribution would face and average tax increase of 3.4 percent of income, or $7,727.”  The TPC adds that “married couples filing jointly would fare worst” because “married couples have much higher average incomes ($125,155 in 2009).”

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Writing in the Wall Street Journal on Nov. 3, however, Obama said, “If you work, pay taxes, and make less than $200,000, you’ll get a tax cut.”  That too is flatly false. Single workers who make more than $80,000 (or joint returns above $155,000) would not get a tax cut under Obama’s plan.      

The centerpiece of the Obama redistribution scheme is a refundable “Making Work Pay Credit” (MWPC) of 6.2% up to a maximum of $8,100 of earnings, or about $500 per earner.  This credit alone would cost $710 billion over ten years, according to the TPC, about half the cost of his entire $1.32 trillion package of assorted tax credits and exemptions.  

The Making Work Pay credit results in a $500 check for those who pay no income tax, but it phases-out quickly once income exceeds $75,000.  A two-earner family could get as much as $1000 from two tax credits, but that disappears as income exceeds $150,000. That is what Joe Biden meant when he said — correctly — that the plan is designed to help those earning less than $150,000.

University of Maine accounting professor Jeff Gramlich created a website which (like the Obama campaign) relies on Tax Policy Center estimates. It shows that a single worker earning $80,000 would get a $132 tax cut in 2010, but a single earning $85,000 would get nothing. A joint return with $155,000 of salary income would get a $270 tax cut, but a joint return with $160,000 would get nothing.

None of the other Obama tax cuts would be available to anyone earning anything close to $200,000. His child care credit phases out as incomes rise from $30,000 to $58,000; his exemption for seniors phases out as income rises from $50,000 to $60,000; his 50-percent savers credit ends at $75,000; his $4,000 college tax credits (which pays $40 an hour for community service work) phases out as family income rises from $100,000 to $120,000. Robert Carroll of the Tax Foundation notes that, “The combination of the phase-out of the EITC, the “Making Work Pay” credit, and the child and dependent care credit pushes the effective marginal tax rate to as high as 51.7 percent. That is, the taxpayer who benefits from all these provisions at a lower income discovers that he gets to keep less than one half of every additional dollar of earnings in the roughly $30,000-to-$43,000 range.”

I recently demonstrated that Obama’s repeated claim about McCain’s alleged $200 billion corporate tax cut is a total fraud. Amazingly, it turns out that Obama is also unable to tell the truth about his own tax plan.

– Alan Reynolds is a senior fellow with the Cato Institute.



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