We all know that Barack Obama is promising to cut the taxes of 95% of Americans, right? Well â€¦ that depends on what you mean by â€œtax cut.â€ The Obama tax plan is an overgrown field of tax credits, not tax cuts. Why is this important? As the Wall Street Journal explained earlier this week, tax credits are not necessarily dependent on you actually paying taxes in order to receive the credit.
Here’s the political catch. All but [Obamaâ€™s] 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.”
Now, I understand that many people believe wealth redistribution is not only economically beneficial but morally preferable. Thatâ€™s fine. But for those who arenâ€™t eager to move our nation towards a more socialistic model, itâ€™s important to understand that Obamaâ€™s â€œtax cutâ€ is not a decrease in rates. In fact, the Obama campaign canâ€™t even answer what rates will go down. And an analysis by fellows of the American Enterprise Institute concluded that Obamaâ€™s plan would actually increase marginal rates (decide the veracity of that analysis for yourself, Iâ€™m not a tax expert and cannot independently verify the conclusion).
Under Obama, most of us will likely get more money back at the end of the year and some of us could actually end up receiving more from the IRS than we contribute, but this all has to do with new credits and not new cuts. There is no tax cutfor individuals and families in Obamaâ€™s plan. I point this out because itâ€™s important to understand the nuances of the plan. Although Obama has been clear that heâ€™s proposing tax credits, his campaignâ€™s repeated assertion that 95% of us will receive a tax cut obscures the exact nature of the proposal as well as the wealth-redistribution program that lurks just under the surface.
If you support wealth redistribution and prefer credits over direct cuts, then, by all means, vote for Obama. But if you are less sure about such schemes, just realize that your Obama tax cut is actually a credit and it comes with socialistic strings attached. Maybe thatâ€™s a compromise youâ€™re willing to make in this election (itâ€™s one I myself might make), but itâ€™s one we should make knowingly.