Obama’s Tax Cut Con

Today’s must read is the The Wall Street Journal’s editorial exposing Obama’s deceptive tax rhetoric.

The Journal says of Obama’s promise to cut taxes on 95% of 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%.

And he has been pushing this angle very hard in key battleground states.  The Journal, however, takes a closer look at his proposals and finds that Obama is up to his old tricks:

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…

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 we have massive wealfare disguised as tax cuts.  But it gets worse:

There’s another catch: 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.

Some families with an income of $40,000 could lose up to 40 cents in vanishing credits for every additional dollar earned from working overtime or taking a new job. As public policy, this is contradictory. The tax credits are sold in the name of “making work pay,” but in practice they can be a disincentive to working harder, especially if you’re a lower-income couple getting raises of $1,000 or $2,000 a year.

There is not an issue where Obama isn’t using sleight of hand if not outright deception to sell his policies.  But these type of debates are hard to get across to the average voter.

As the Journal notes, McCain needs to find a way to explain the reality of Obama’s policies and their effect on voters.  Obama is a talented con man, McCain has to find a way to break the spell of America is in for a harsh awakening.

Related Reading:

The Ernst & Young Tax Guide 2009 (Ernst and Young Tax Guide) For Preparing Your 2008 Taxes

J.K. Lasser's Your Income Tax 2009: For Preparing Your 2008 Tax Return

South-Western Federal Taxation 2009: Individual Income Taxes (with TaxCut® Tax Preparation Software CD-ROM) (West's Federal Taxation: Individual Income Taxes)

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