2008 October 14 Tuesday
Obama Mislabels Tax Credits As Tax Cuts

Barack Obama exaggerates the extent of his tax cutting proposal.

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.

I'd rather get lower tax rates as my preferred way to pay less taxes. It is simple to understand and you don't have to fit into special categories to pay less. But Barack isn't aiming for my vote. The 44% of tax filers who do not even have to pay income taxes will be eligible for credits that Obama bills as tax cuts. Only the clean car credit below is restricted to people who actually pay income taxes.

- 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. Once upon a time we called this "welfare," or in George McGovern's 1972 campaign a "Demogrant." Mr. Obama's genius is to call it a tax cut.

So Barack is aiming for the votes of people who aren't net taxpayers. These people already get more than they pay for.

A mortgage tax credit? That's the worst one on the list. We are paying enough already for irresponsible home buyers. We need to subsidize their recklessness even more? This is unfair to renters and to savers.

We are talking big money. Taxpayers have to pay so that credits can be handed out to others.

The total annual expenditures on refundable "tax credits" would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center.

I am expecting that Barack will shaft me so he can play leftist social engineer.

Share |      By Randall Parker at 2008 October 14 12:10 AM  Politics Money


Comments
HellKaiserRyo said at October 14, 2008 1:46 AM:

I presume you are supporting McCain now...

Right now, I prefer Obama mainly because of his judicial picks.

dchamil said at October 14, 2008 6:43 AM:

And right after president Obama pardons O.J., he will recycle your pitiful earnings to someone else who is more worthy than you!

Ned said at October 14, 2008 7:10 AM:


Hundreds of economists (including Nobel Prize winners Gary Becker, James Buchanan, Robert Mundell, Edward Prescott, and Vernon Smith) have signed letters opposing Barack Obama's economic and tax plans (here, here, and here):

We are equally concerned with his proposals to increase tax rates on labor income and investment. His dividend and capital gains tax increases would reduce investment and cut into the savings of millions of Americans. His proposals to increase income and payroll tax rates would discourage the formation and expansion of small businesses and reduce employment and take-home pay, as would his mandates on firms to provide expensive health insurance.

After hearing such economic criticism of his proposals, Barack Obama has apparently suggested to some people that he might postpone his tax increases, perhaps to 2010. But it is a mistake to think that postponing such tax increases would prevent their harmful effect on the economy today. The prospect of such tax rate increases in 2010 is already a drag on the economy. Businesses considering whether to hire workers today and expand their operations have time horizons longer than a year or two, so the prospect of higher taxes starting in 2009 or 2010 reduces hiring and investment in 2008.


http://taxprof.typepad.com/taxprof_blog/2008/10/hundres-of-econ.html


kurt9 said at October 14, 2008 1:15 PM:

Randall,

Did you honestly expect anything different?

After all, Obama is the DEMOCRATIC candidate for president as well as liberal-left to boot.

Randall Parker said at October 14, 2008 6:36 PM:

HellKaiserRyo,

I am still hard pressed to tell you which guy would be the bigger disaster. But I'm going to focus my criticism on Obama because he's already won and we need to start discussing what is wrong with the proposals he will make to Congress next year.

Really, the election is over. McCain is a loser.

thegomezsymbol said at October 15, 2008 6:39 AM:

When even Christopher Hitchens endorses Obama (http://www.slate.com/id/2202163/), I guess it is time to celebrate the fact that Palin will not have a shot to run the country. I think that would clearly be the biggest disaster on the table. And as HellKaiserRyo says, his judicial picks too might be a reason to celebrate.

On the other hand, we could also start "discussing what is wrong with the proposals Obama will make to Congress next year" though Randall may need to lend us his time machine...


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