Monday, October 13, 2008

When is a Tax Cut Not a Tax Cut?

We noted previously that Obama is counting his tax increases as "spending cuts," but wait, there's more. He's also calling his spending increases "tax cuts." Somewhere around 40% of the populace is already paying no income taxes, so we were confused as to how 95% of people could get a tax cut. Used to be you actually had to pay taxes before they could be reduced, but no more. As the Wall Street Journal explains, Obama is proposing seven new "tax credits:"
Obama's 95% Illusion - "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.

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.

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. This means that the tax-credit welfare state would soon cost four times actual cash welfare. By redefining such income payments as 'tax credits,' the Obama campaign also redefines them away as a tax share of GDP. Presto, the federal tax burden looks much smaller than it really is."
So much for ending welfare as we know it. It's all about "spreading the wealth around." As he tells the plumber in the video, Obama doesn't want to punish his success. If he had, Obama would probably have given the guy a baby. Here's a tip: Just say, "Keep the change, Barack."

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