How can Barack Obama say 95% of Americans are getting tax cuts when 35% of Americans pay no taxes?
How can you cut something from zero?
Isn't that a lie by Barack Obama?
A few facts that people are missing:
The top 1% wage earners pay about 39% of all taxes, the top 5% pays about 60%, and the bottom 35% of workers pay zero taxes.
A tax credit if a worker pays no taxes is not a tax cut, it is Government Welfare.
That is not a "tax cut"
It still appears Obama is lying unless someone can prove otherwise.
- ?Lv 51 decade agoFavorite Answer
Obama's 95% Illusion
It depends on what the meaning of 'tax cut' is.
One of Barack Obama's most potent campaign claims is that he'll cut taxes for no less than 95% of "working families." He's even promising to cut taxes enough that the government's tax share of GDP will be no more than 18.2% -- which is lower than it is today.
- 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.
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.
The political left defends "refundability" on grounds that these payments help to offset the payroll tax. And that was at least plausible when the only major refundable credit was the earned-income tax credit. Taken together, however, these tax credit payments would exceed payroll levies for most low-income workers.
It is also true that John McCain proposes a refundable tax credit -- his $5,000 to help individuals buy health insurance. We've written before that we prefer a tax deduction for individual health care, rather than a credit. But the big difference with Mr. Obama is that Mr. McCain's proposal replaces the tax subsidy for employer-sponsored health insurance that individuals don't now receive if they buy on their own. It merely changes the nature of the tax subsidy; it doesn't create a new one.
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.
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%. But how does he conjure this miracle, especially since more than a third of all Americans already pay no income taxes at all? 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:
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. One mystery -- among many -- of the McCain campaign is why it has allowed Mr. Obama's 95% illusion to go unanswered.
- 4 years ago
All of those who say Obama is cutting taxes for 95% of the working class are full of it. No one is getting a tax cut. It's a scam. Obama wants to create more tax credits, but it all depends whether or not you get them; the more you make, the government will reduce those tax credits, which is called a "phase-out." Basically, Obama will create more tax credits and maximize some existing tax credits even more and will phase it down over a larger income range, raising marginal tax rates. He will also make certain tax credits refundable, but will penalize those who receive the refund, introducing a tax penalty of 10% or 15%, depending on the bracket. Therefore, the amount of negative income tax that you receive from the government is reduced. What Obama really means by tax cuts is cutting the amount of tax credits or money you receive from tax credits. Sounds like a plan? Nope. It will not help fix the economy but actually hurt it.
- 1 decade ago
He really means 95% of working families. It really works out to somewhere around 80% of Americans. Even if someone doesn't pay taxes, they may be getting a tax credit. There is a great non-partisan site devoted to sorting out truth from fiction in this election.Source(s): www.politifact.com
- Doc WatsonLv 71 decade ago
Because most of these who don't pay taxes are tax sheltered individuals and corporations with Bush funded tax breaks.
With the right accountant you can get a free ride under Bush's tax shelters.
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- BrandonLv 51 decade ago
If you research the answers will come. Both Obama and McCain have pretty good ideas as far as the economy and taxes go, but both ideas have an equal amount of potential to fail.
- Anonymous1 decade ago
It's the same as saying 25% tax hike is really a tax cut
- notagainLv 61 decade ago
I can’t stand the sense of entitlement people have. I make modest amount of money 95k/year, and may never make a lot more. But what other people make is none of my business.
Why should I receive a chunk of what they earn, just because I’m jealous of their big houses? He who is richest is happiest with his share. I have learned that chasing after money (especially other people’s), rather than chasing friendship and satisfying work, only leads to misery. This is especially true if you chase money you didn’t earn.
- AuntieZoeyLv 41 decade ago
Cut taxes for 95 percent of workers and their families with a tax cut of $500 for workers or $1,000 for working couples.
He didn't say 95% of Americans...
I'm a better English reader than you are even though I'm not a native English speaker...
- TRUTH™Lv 51 decade ago
No, It is almost too ridiculous to comment on this.
Obama obviously knows some do not pay taxes.
Don't you think maybe that he meant 95% of Americans that actually DO pay taxes? Maybe it is just me that has made this obvious assumption, I don't need everything spelled out for me.
- Anonymous1 decade ago
Because in his view of Amerika yes I spelled it that way...everyone pays taxes....because the only way to fund his 'programs' is to tax the $hit out of EVERYONE!!! even the homeless and the deceased are gonna get taxed...just like in every socialist regime...thus the spelling of Amerika......get it...got it??? GOOD!!!!!!!!!!