Excerpted from the WSJ, “Obama’s Tax Plan Is Really a Welfare Plan”, By Peter Ferrara, August 19, 2008
Barack Obama’s tax plan … proposes to raise marginal rates for just about every federal tax … the top individual income tax rates … would be increased by 13% … the top rates on capital gains and dividends would rise by a third, to 20% … a permanent federal estate tax, with a top rate of 45% … a new payroll tax on employers to fund his health-insurance plan … several increases in the corporate income tax, including a new so-called windfall profits tax on oil companies.
(Obama) also proposes a raft of tax credits that taxpayers can receive if they engage in various government-specified activities.
Moreover, the tax credits would mostly go to those who pay little or nothing in federal income taxes. His trick is to make the tax credits “refundable.” Thus, if the tax credit is for $1,000, but the taxpayer would otherwise only pay $200 in taxes, the government would write a check to the taxpayer for $800. If the taxpayer pays nothing in federal income taxes, the government would pay him the whole $1,000.
In effect, Mr. Obama is proposing to create or expand a slew of government spending programs that are disguised as tax credits. The spending on these programs is then subtracted from the total tax burden, in order to make the claim that his tax plan is a net tax cut overall.
Mr. Obama proposes … having the government pay out $500 to each worker and $1,000 to couples — reminiscent of George McGovern’s 1972 election proposal for the government to send a $1,000 check to everyone … he would provide a $4,000, fully refundable tax credit for college tuition expenses …. he would provide a 10% refundablecredit -to offset mortgage interest payments … and “a new refundable 50 percent health tax credit on employee premiums paid by employers.”
Currently existing tax credits would also become spending programs in the Obama tax program. The Savers Credit would be made fully refundable, and would be expanded … The Child and Dependent Care Tax Credit would be made refundable and expanded … The Earned Income Tax Credit i– already refundable — .would be expanded
In short, welfare spending is to be increased by paying more money out to low-income income tax filers.
The latest Congressional Budget Office data shows the bottom 40% of income earners already pays no income taxes. Indeed, they receive a net payment from the federal income tax system — meaning from the taxpayers — equal to 3.8% of all federal income taxes, because of the refundable tax credits under current law. The middle 20% of income earners, the true middle class, pays 4.4% of federal income taxes.
Overall, the bottom 60% of income earners pay less than 1% of federal income taxes on net. When “tax credits” primarily go to this group in the form of checks from the government (rather than a reduction in their tax burden) it is simply an abuse of the language to call the spending a tax cut.
Full article (definitely worth reading):
http://online.wsj.com/article_print/SB121910303529751345.html
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Note: Author fails to mention that a majority of voting age citizens won’t be paying any Federal income taxes under Obama
Nothing good is likely to happen when “a majority of voters discover that they can vote themselves largess out of the public treasury.” Commonly attributed to Alexander Tytler (whoever that is)
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Self-prop: We were all over this issue a couple of weeks ago.
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The Homa Files 
August 19, 2008 at 2:38 pm |
Nice transition to first-person plural, and I look forward to seeing you, ahem, Ken Homa, make the final transition to third-person singular in subsequent posts.