Many conservative critics of Obama's tax plan, including yours
truly, have objected that Obama has characterized as tax cuts
what really amount to subsidies for non-taxpayers. But a few
free-market types, most notably
Ramesh Ponnuru and Dave Weigel,
have pushed back against this. They both point out, correctly,
that McCain also supports refundable tax credits in some
instances -- that is, the extension of tax benefits to people
with little or no income tax liability. Ponnuru also observes
that most of these workers do pay payroll taxes even if they
don't pay income taxes,
About three-quarters of tax filers pay more in payroll taxes than
they do in income taxes. According to at least one study,
middle-income households pay nearly twice as much in payroll
taxes as they pay in income taxes. I'm not sure
conservatives want to denigrate these taxpayers' contributions to
federal coffers, dismiss tax benefits for these working families
as welfare or pass up an opportunity to cut their taxes.
That said, I still think Obama's tax plan amounts to robbing
Peter to pay Paul. He avoids cutting payroll taxes directly
because he does not want to be seen as diverting revenue from
Social Security (and unlike supporters of personal accounts, he
isn't altering benefits or improving workers' rate of return on
their forced contributions). So instead Obama uses the federal
income tax code to offset their payroll taxes, the earned income
tax credit on steroids. The result increases marginal rates and
does little to enhance incentives for work or investment -- in
fact, the Obama tax plan does the opposite.
Ponnuru is probably right that this isn't the best political case
to be made against the Obama tax plan. It is probably more
promising to point out the damage Obama's promised tax increases
will do while emphasizing that there will be more tax hikes where
they came from. McCain should also be as aggressive in defending
the tax-cut effects of his health care plan as Obama has been in
describing that plan as a tax increase (while ignoring the tax
burden imposed by his own health plan). But as conservatives seek
ways to make tax cuts relevant again to workers who don't have
high income tax liabilities, they should find some language for
saying that the Obama tax plan isn't the right way to go about
it.
topics:
Election 2008, Taxes, John McCain, Barack Obama, Economics, Entitlements, Conservatism
