Democrats have this ugly habit of redefining words when facts don't help them. That's how Democrats claimed that Ronald Reagan and George H.W. Bush were "cutting" programs when all that was reduced was the percentage the programs grew. By any stretch of the imagination, reducing the rate of growth isn't a "cut."
Now we have the lyin' Obama campaign claiming it will cut taxes for 95% of Americans. As the Wall Street Journal points out, the only way Obama can do this is if you redefine was a "tax cut" is.
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:
- 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.
The dirty little secret is that these promises are tax credits, meaning the government will write you a check even if you paid no taxes. As WSJ says, we used to call this "welfare," but "tax cut" sounds so much better.
The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation's Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.
We had welfare reform in the 1990s which was aimed at getting people off the government dole. Now Obama wants to put more people on the dole. After all, Democrats know that if you hand people money they didn't earn, they're more likely to keep voting for you. Preaching personal responsibility, while the grown-up position, isn't as much fun as being told you get free money.
But who pays for these giveaways? Why, the rest of us, that's who. If you have been successful, we don't want you to keep the fruits of your success. It's not "fair" that you worked harder and smarter and got ahead.
The worst part of this plan is that the disincentives for work are enormous.
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.
If this mess gets passed, it will take a generation to fix it.
|