Smearing Tax Cuts as Handouts

I never thought I'd see the day when conservatives would do a smear job on tax cuts.

I had a, shall we say, lively discussion with conservative Town Hall blogger Amanda Carpenter for the weekly The Week In Blog segment over at bloggingheads.tv. [1]. And she offered the latest conservative misinformation about taxes. The relevant clip is below.

As you can see, there is an conservative effort to characterize Sen. Barack Obama's tax plan as taking money from good hard-working Americans, and giving handouts to the "40 percent" of Americans who are too poor to pay taxes (read: the lazy, shiftless and irresponsible).

Carpenter also demanded I apologize to the Wall Street Journal editorial board member Kimberley Strassel [2] for doubting her numbers in her column: [2] "...Mr. Obama will give 95% of American working families a tax cut, even though 40% of Americans today don't pay income taxes! How can our star enact such mathemagic? How can he "cut" zero? Abracadabra! It's called a 'refundable tax credit.' It involves the federal government taking money from those who do pay taxes, and writing checks to those who don't. Yes, yes, in the real world this is known as 'welfare,' but please try not to ruin the show."

But my instinct was right, and no apology from me is warranted.

First, conservatives won't tell you that even if you earn too little to pay federal income taxes, you still pay the regressive, flat 15.3% payroll tax on any annual income below $102,000-- a significant amount of which goes into the same general fund as income taxes. Atlanta Journal Constitution's Jay Bookman explains in further detail. [3]

Second, Obama proposes specific "refundable tax credits" -- meaning they can result in tax refunds even if you don't end up owing income tax -- for specific instances, not wholesale "handouts" for every single person who doesn't owe income taxes, as both Carpenter and Strassel claimed.

As the McCain campaign laid out to ABC: [4] Obama's refundable tax credits are "(1) a 'make-work-pay' credit of up to $500, (2) a universal mortgage credit of 10% of mortgage interest, (3) three different extensions of the Earned Income Tax Credit, (4) a refundable child care credit, (5) a [retirement] saver's credit, (6) a Hope Credit [for certain education expenses], and (7) a 100% match of college expenses up to $4,000."

In other words, it's a way to help low-income people get more take-home pay, stay in their homes, save for retirement and pay for education, without involving additional government bureaucracy (despite the conservative attempt to make it sound like a stereotypical welfare program, giving handouts to lazy deadbeats).

But as ABC also notes (as did I during the above segment), McCain's health insurance tax credit is also designed to be "refundable." [4] Maybe he offers fewer refundable tax credits than Obama, but he obviously is not opposed to the concept in principle.

I also said in the above clip that the positive thing about the broader tax debate is that both Obama and McCain have clearly laid out their tax proposals. Individuals and business can see what they make, determine how the proposals would affect them, and make an informed decision whether the plans are fair, fiscally sound and helpful for our government to do what the public asks it to do.

But we can only make that informed decision if we beat back all the attempts to misinform the public.