Obama's 'Tax Cuts' More Like Redistribution

Sen. Barack Obama claims that as president he would cut taxes for 95% of all Americans. He has fought back against charges from Republican Sen. John McCain that he would increase taxes on working Americans by promising that no one making under $250,000 per year would see one penny in increased taxes under the Obama tax plan. But what Sen. Obama doesn't mention, and which Sen. McCain thus far hasn't mentioned, is that Obama's plan to cut taxes for 95% of Americans is based on a false premise, that all Americans pay federal income taxes. Not all Americans do.

In fact nearly 40% of all American households have no federal income tax liability. Obama proposes to "cut" their taxes by sending them "refundable tax credits" good for between $500 and $1000. At the same time, Sen. Obama promises to eliminate the Bush tax cuts of 2001 and 2003 for those making over $250,000 a year. In effect, then, Obama's tax plan is a classic redistribution of wealth, from those making more than the government sanctioned level of acceptable income, to those making less.

The Obama campaign claims that its "refunds" would offset the federal payroll taxes that all workers pay, even if they have no federal income tax liability. That is how the campaign can continue to claim that 95% of Americans will receive a tax cut. But by subjecting those better able to pay to a greater and greater share of the overall tax burden, Obama ultimately risks the relief he says that the middle class so desperately needs. The top 5% of income earners in the U.S. already pay 60% of the total tax bill, while the bottom 50% pay less than 3%, according to the National Tax Union's most recent figures. In other words, the tax burden is already distributed pretty unevenly amongst filers. Obama proposes to make it even more top heavy.

In the face of increasing tax burdens, top wage earners will seek to reduce their liability by limiting their reportable income. That will decrease the amount of money collected by the federal government, not increase it as Obama intends. Decreasing federal revenues will explode budget deficits already increasing rapidly as a result of the Democratic Congress' inability to practice spending restraint. That is likely to cause the tax relief that Obama promises to be left on the cutting room floor.

Ronald Reagan and George W. Bush proved that cutting taxes increases federal revenue. But spending restraint must go along with tax cuts in order to balance the budget. Obama seeks to increase federal revenues by squeezing the rich even more, while at the same time promising close to a trillion dollars in new federal spending. It is a recipe for fiscal disaster that would make the Bush deficits seem austere by comparison. Sen. Obama is not being honest about his "tax cuts" for 95% of Americans. In the end, it will be those very Americans he purports to want to help that will be stuck with the bills.