SubscribeHow to cut taxes for those who don’t pay them
Short answer: Wealth redistribution.
Shorter answer: Welfare.
How Obama’s vote-buying 95% tax cut scheme works.
One of Barack Obama’s most potent campaign claims is that he’ll cut taxes for no less than 95% of “working families.”
First, the bait and switch:
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.”
This is also known as welfare, but a rose by any other name…. Still a good deal for hard working families?
Nyet Komrade.
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Buried under all the slick talk is the great big spike in marginal tax rate.
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.
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.
This will feel like a major disincentive to earn more, which translates into stagnation, discontentment, and in my mind, higher taxes down the road. Why would I take a job with a 20% pay raise if my taxes are going to increase by so much I won’t see the extra money, only feel the extra responsibility, longer hours, etc? The financial incentive is to remain lower on scale and take advantage of the handouts rather than move up the scale and help pay for them.
Great article - a must read: Obama’s 95% Illusion - WSJ.com
October 14th, 2008 at 5:39 am
[...] The Truth about Obama’s “tax cuts” 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. Obama is a typical socialist who wants to redistribute wealth. He actually creates a disincentive to work hard. [...]