The Wall Street Journal editorial board recently used the word “genius” to describe the way Obama has marketed his tax proposals to the American people.
The “genius” part, according to the WSJ, is that Obama is proposing “tax credits,” but referring to them as “tax cuts.”
But these “credits” aren’t properly called “tax cuts,” according to the WSJ, because:
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.
Get it? The WSJ believes it’s wrong for Obama’s proposed “tax credits” to be called “tax cuts” because 63 million Americans who would receive the credits don’t actually pay any federal taxes (or pay so little in federal taxes that the cuts would exceed the sum total of what they pay).
Get it? 63 million Americans — those on the poorer side, I assume — don’t pay taxes! (They are SO lucky!) And how can you get a tax cut if you don’t pay taxes, right?
Amazingly, the WSJ goes on the complain about why McCain hasn’t called out Obama on this issue:
One mystery — among many — of the McCain campaign is why it has allowed Mr. Obama’s 95% illusion to go unanswered.
I suppose it is possible that the WSJ editorial board is so politically stupid that it cannot figure out why McCain wouldn’t spend tons of time pointing out that 63 million Americans apparently pay no federal taxes.
So I will address you directly, WSJ editors, and explain it to you. Just imagine if McCain tried to attack Obama’s tax cut proposals by saying, “These aren’t tax cuts! They’re handouts! It’s impossible to cut taxes for the poor and middle class in this country, because they don’t pay enough in taxes to receive cuts! If you want to cut taxes, the only people whose taxes can be cut are people who are paying more — like the rich!”
If McCain did that, it would reveal the truth about the Republican Party’s obsession with “cutting taxes” — this right-wing benefits the rich far, far more than it benefits the poor and middle class.
If you can find one of these 63 million Americans who would (as the WSJ sees it) unfairly benefit from Obama’s tax credit, you should tell him or her that they can’t receive tax cuts because they don’t pay any taxes, or almost no taxes. Then, observe their reaction. That experience may help you understand the “mystery” of why McCain hasn’t spent more time explaining why Obama’s “tax credits” aren’t technically “tax cuts.”
Both you and the WSJ are making the error of conflating income taxes with payroll taxes. The WSJ deliberately I’m sure.
To wit, most people on the poorer end of the spectrum will not pay much income tax but will pay payroll taxes which are essentially flat.
So if you have an income tax credit to offset the payroll tax does it feel like a tax cut? I would think it does. Most people don’t distinguish between FICA and FIT on their paychecks.
Comment by John — October 13, 2008 @ 10:54 am
I am not making the error of conflating income taxes with payroll taxes. I am merely assuming that the WSJ isn’t lying to me. A stupid assumption, I know.
Comment by Ian — October 13, 2008 @ 12:10 pm
The WSJ editorial does say the following:
Comment by Lee — October 13, 2008 @ 12:16 pm
I stand corrected on the income/payroll semantics but I still think the two must be viewed together for the purposes of tax policy.
I think it might be simpler just to exclude the first, say, $30,000, from payroll taxes rather than have an income tax credit.
Comment by John — October 13, 2008 @ 12:18 pm
Right, the Journal editorial spends very little time discussing payroll taxes. Its purpose is to rhetorically reframe Obama’s “tax cuts” as “welfare.” I think the reason McCain hasn’t brought this up is what Ian has said: knowing more about the specific mechanism of tax credits would not dampen the popularity of Obama’s proposal with the American public.
Comment by Lee — October 13, 2008 @ 12:23 pm
Not only that, but anti-tax rhetoric loses its power in general when poor and middle class Americans realize it has nothing to do with them — it’s just about cutting taxes for rich people.
Comment by Ian — October 13, 2008 @ 12:43 pm
If anything this shows how much rhetorical packaging matters. For example, “tax cut” sounds like you are getting back your money where “tax credit” sounds like someone else is getting your money. And people have different emotional reactions to them even if they are mathematically equivalent.
This speaks to another common problem. That there are really four classes: rich, middle class, working class, and poor. But no one wants to admit that they are working class and think of themselves as middle class and take the wrong side in tax and money issues.
Comment by John — October 13, 2008 @ 1:19 pm
John, your point about identity is really important, I think. There’s a stigma in our culture about being poor or middle class — even though honest, hard-working, tax-paying, law-abiding people end up in the working class (or even poor) when factories close, unexpected medical bills arise, or for other reasons — even natural disasters. And then there are the disadvantages that people face due to failing schools, etc. That’s why the phrase “working class” was such an important improvement — because Americans do value work.
Comment by Ian — October 13, 2008 @ 10:47 pm