Posted by: Randy Allgaier | September 15, 2008

McCain Lies About Obama’s Tax Plan- JUST THE FACTS!


Another lie Senator McCain and Palin repeat without compunction is that Obama would increase taxes on everyone. McCain repeats the lie in every appearance.

Representative Steve King (R-IA) has echoed these claims on Hardball with Chris Matthews, but Debbie Wasserman-Schultz (D-FL) correctly countered that 95 percent would actually benefit from Obama’s plans.
“Obama and his liberal allies promise higher taxes on your income, life savings, your electric bill. They oppose offshore drilling,” a McCain ad states.

Repeating the tax lie is central to McCain’s campaign; indeed getting lies accepted as truth has become the essence of the McCain campain. It is what being a “maverick” has come to mean. So it does not matter that independent analyses show McCain’s claim is patently false.

A clear refutation of the lie appears in a must-read article, How Obama Reconciles Conflicting Views on the Economy, by David Leonhardt, which previewed in the New York Times on August 24 and appeared again in the Sunday Times Magazine. It’s an excellent discussion of Obama’s overall economic views, which I suspect will surprise even some here.

On Obama’s tax proposals, Leonhardt explains why McCain’s claims are simply false:
The Tax Policy Center, a research group run by the Brookings Institution and the Urban Institute, has done the most detailed analysis of the Obama and McCain tax plans, and it has published a series of fascinating tables [For the bottom 80 percent of the population — those households making $118,000 or less — McCain’s various tax cuts would mean a net savings of about $200 a year on average. Obama’s proposals would bring $900 a year in savings. So for most people, Obama is the tax cutter in this campaign.

. . . Most of the public discussion about taxes tends to focus on the income tax, which taxes the affluent at a considerably higher rate than anyone else. But the income tax doesn’t take the biggest bite out of most families’ annual tax bill. The payroll tax does. And even as the federal government has been reducing income taxes over the last few decades, it has allowed the payroll tax, which finances Social Security and Medicare, to creep up. . . .

Obama’s second-most-expensive proposal, after his health-care plan, is the equivalent of a $500 cut in the payroll tax for most workers. (It is actually a credit that is applied toward income taxes based on payroll taxes paid.) In a speech this month in Florida, he proposed that the cut take effect immediately, in the form of a rebate, to stimulate the economy. For most workers, it would be the first significant cut in the payroll tax in decades, if not ever. . . .

[In addition to other tax breaks to benefit the middle class . . .]

He would then pay for the cuts, at least in part, by raising taxes on the affluent . . . For these upper-income families, the Tax Policy Center’s comparisons with McCain are even starker. McCain, by continuing the basic thrust of Bush’s tax policies and adding a few new wrinkles, would cut taxes for the top 0.1 percent of earners — those making an average of $9.1 million — by another $190,000 a year, on top of the Bush reductions. Obama would raise taxes on this top 0.1 percent by an average of $800,000 a year.

. . . The bulk of Obama’s tax increases on the wealthy — about $500,000 of that $800,000 — would simply take away Bush’s tax cuts. The remaining $300,000 wouldn’t nearly reverse their pretax income gains in recent years. Since the mid-1990s, their inflation-adjusted pretax income has roughly doubled.

[McCain is not only lying about Obama’s tax cuts; he’s trying to avoid talking about the basic unfairness of the tax system — the huge advantage for the very rich — that the McCain/Bush tax policies would perpetuate. By obscuring that unfairness, McCain can pretend to be a champion for the middle class, even though he’s not. Obama not only cuts taxes for most Americans; he does it in a way that starts to reverse the serious unfairness that has been built into the tax system since Ronald Reagan.

Let’s tell the truth here.  According to Factcheck.org, A McCain ad wrongly claims Obama plans “painful tax increases” for working families. A McCain  ad puts another stitch in what we’ve called his pattern of deceit on Obama’s tax plan. This one claims Obama and congressional Democrats plan to push forward “painful tax increases on working American families” .

In fact, Obama’s economic plan would produce a tax cut for the majority of American households, with middle-income earners benefiting most. As for “years of deficits,” exactly the same claim could be made about McCain’s program. It’s unlikely either Obama or McCain would balance the budget, and both are projected to increase the debt by trillions.

Analysis

We’ve already reported on at least three other ads, in both Spanish and English, from Sen. John McCain’s campaign that distort his rival’s tax policy. The ads claim that, for example, Democratic Sen. Barack Obama would raise taxes “on the sale of your home” and that he has a “history of raising taxes” and that he wanted to raise taxes on “families” making just $42,000 a year.

Claims like these have led us to say that McCain’s campaign is engaging in a “pattern of deceit” when it comes to describing Obama’s tax plan. This most recent ad fits right into the template.

Tax Counter-Spin

The ad says Obama and “out of touch Congressional leaders” plan to implement “painful tax increases on working American families,” and it shows an image of a family presumably upset about an impending tax increase. But, as we’ve reported numerous times, Obama proposes a tax cut for the vast majority of households.

We spoke with Len Berman, director of the nonpartisan Urban-Brookings Tax Policy Center, which has produced one of the most authoritative analyses of the two candidates’ tax plans. When we asked him if Obama’s claim that he would “cut taxes for 95 percent of all working families” was true, Berman told FactCheck.org that it was “consistent with our estimates.” Overall, the TPC found that Obama’s plan would produce a tax cut for 81.3 percent of all households, and a cut for 95.5 percent of all households with children.

Just the facts? 

Let’s just look at the non-partisan side by side analysis of the Tax Policy Center- a project of the Brookings Institution and the Urban Institute.

                               BARACK OBAMA                  JOHN MC CAIN

New Tax Cuts

Refundable Making Work Pay tax credit of 6.2 percent of earnings up to a maximum of $8,100

Refundable Universal Mortgage Credit of 10 percent or mortgage interest for nonitemizers, capped at $800 ($8,000 of interest)

Eliminate income tax for senior making less than $50,000 per year

First-time buyers tax credit for new farmers

Small Business and Microenterprise Initiative tax credit of 20 percent on up to $50,000 of investment in small owner-operated businesses

Allow first-year deduction of 3 and 5-year equipment, deny interest deductions (expires)

Reduce maximum corporate tax rate from 35 to 25 percent

Increase the dependent exemption by 70 percent

Suspend the federal gas tax (18.4 cents per gallon from this Memorial Day until Labor Day

Adjustments to Existing Credits

Make R&D and renewable enery production tax credit (wind, solar) permanent

Extend childless EITC phase-in range and increase phaseout threshold, double the phase-in and phase-out rates for childless individuals paying child support, increase EITC phase-in rate to 45 percent for families with three or more children; increase add-on to EITC phase-out threshold for married filers to $5,000

Make CDCTC refundable and allow low-income families to receive up to a 50 percent credit for child care expenses

Make saver’s credit refundable and change to a 50 percent match of the first $1,000 of savings, phases out beginning before $75,000

Increase Hope credit 100% match rate to $4,000 for college education and make refundable, rename American Opportunity Tax Credit

Mandate automatic 401(k)s and automatic IRAs

Convert R&D credit to 10 percent of wages incurred for R&D, make permanent

Capital Gains

Increase maximum capital gains rate to 20 percent

Require information reporting of basis for gains

Eliminate capital gains taxation of start-up businesses and provide capital gains tax break for landowners selling to beginning family farmers

Keep the current rates on dividends and capital gains

Bush Tax Cuts

Permanently extend marriage penalty relief, adoption credit expansions, 10,15,25, and 28% rates, EITC simplification

Restore 36 and 39.6% statutory income tax rates, Restore PEP and Pease phaseouts for households making more than $250,000, increase in PEP and Pease threshold

Make permanent all provisions other than the estate tax repeal

     

Alternative Minimum Tax

Extend and index 2007 AMT patch

Extend and index 2007 AMT patch, further increase exemption by 5 percent in excess of inflation after 2013 (temporarily)

Estate Tax

Make permanent estate tax with $3.5 million exemption and 45 percent rate

Make permanent estate tax with $5 million exemption and 15 percent rate

Simplification

Give taxpayers the option of pre -filled tax forms to verify, sign, return to IRS

Give taxpayers the option of an alternative tax system with two rates and a larger standard deduction and personal exemption

Revenue Raisers and Tax Havens

Eliminate oil and gas loopholes

Close loopholes in the corporate tax deductibility of CEO pay

Tax carried interest as ordinary, Increase the highest bracket for capital gains and dividends

Reallocate multinational tax deductions

Codify economic substance doctrine

Create international tax haven watch list

Other unspecified revenue raising provisions

Eliminate oil and gas loopholes

Unspecified corporate base broadeners

Eliminate earmarked projects from the budget, freeze nonmilitary discretionary spending for one year, eliminate programs

Health

Income-related federal tax subsidies for health insurance

Replace exclusion from income for employer sponsored health insurance with refundable credit of $2,500 for individuals and $5,000 for families

Other

Social Security/payroll taxes: impose additional tax of 2-4 percent (combined employer and employee) on workers with income above $200,000 ($250,000 for married couples)

Require a 3/5 majority vote in Congress to raise taxes

Ban internet and cell phone taxes

Higher premiums for Medicare prescription drug coverage for single people earning more than $82,000 and couples earning more than $164,000

 

 

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Responses

  1. Exactly how is the current tax system “unfair”. The wealthiest 1% of taxpayers not only pay 40% of all taxes, but that percentage has actually INCREASED during the Bush years (the proportion of taxes paid relative to the proportion of national income earned has also increased for the top 1%). What exactly is the proportion of taxes paid by the top 1% that would be “fair,” and exactly who is it that gets to make this determination, and by what criteria will it be decided?

    The only “fair” distribution of taxes would be for each taxpayer to pay an EQUAL amount (not an equal percentage of income, but an equal absolute payment). Of course, this wouldn’t raise nearly enough revenue, so the higher earners quite nobly pay more than their share to fill the government treasury. The only unfairness is that higher earners pay more than lower earners. There’s no rationale for assuming higher earners owe the government more. Why?


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