By John Griffing
Both candidates in last night’s presidential debate said they want to help the middle class, and in the case of Barack Obama his tax proposals are on paper before Congress, which has raised some questions about his rhetoric.
The quarrel between Republicans and Democrats in Congress has been that Obama’s tax plan consists of resetting to the Clinton-era tax brackets, in effect, a tax increase because the tax reductions adopted under President Bush would be abandoned.
Analysts say such an increase in the current economic climate could delay whatever economic recovery is developing, or worse, turn it back on a path of decline, putting job-seekers at a further disadvantage.
Obama himself once said as much, remarking in 2008, “I think we’ve got to take a look and see where the economy is. I mean, the economy is weak right now. The news with Freddie Mac and Fannie Mae, I think, along with the unemployment numbers, indicates that we’re fragile.”
Obama made several claims regarding tax policy during the debate, and they are:
- Obama alleged Gov. Mitt Romney’s tax cut proposal would result in $8 trillion in new spending. As Obama stated, “Now, Gov. Romney was a very successful investor. If somebody came to you, governor, with a plan that said, here: I want to spend 7 [trillion dollars] or $8 trillion, and then we’re going to pay for it, but we can’t tell you until maybe after the election how we’re going to do it, you wouldn’t have taken such a sketchy deal.” At this moment in the debate, Obama challenged how Romney’s middle class tax cut would pay for itself, citing revenue concerns, though not applying the same question to his own alleged tax cut.The facts: Revenues are known to grow faster when marginal income tax rates are cut, this being attributed by many economists to faster resulting economic growth, which is believed to broaden the income tax base and yield higher revenue. Obama did not apply the same rubric to his own proposed tax cuts, and did not discuss the $6 trillion in new debt added during his administration.[For more information, see the "Historical Tables" in the appendices of the US Budget for revenue data. Also visit www.taxfoundation.org for historical data on marginal income tax rates during various periods.]
- Obama claimed that Romney wanted to cut taxes for the wealthy, referencing interviews where Romney supposedly said that he thought cutting taxes on the wealthy was the way to get the economy moving. Obama has often suggested that he simply wants “the rich” to pay their “fair share.”The facts: Job-creators often earn more. Small businesses are taxed as individuals, making shifts in personal income tax rates especially relevant for job creation, since small businesses employ over 50 percent of American workers. Romney actually advocates closing loopholes for the so-called “wealthy,” despite the fact that tax returns and other data indicate that the “rich” always pay a larger share of the tax burden after tax cuts. This flies in the face of the suggestion by Obama that Romney “has held the 98 percent hostage” because he wants “tax breaks for the top 2 percent.” Congressional Republicans advocate maintaining current levels of taxation and no cuts for the top 2 percent are being discussed.
- Obama claimed that he cut taxes for middle income families by $3,600 18 times.The facts: Obama did not reduce marginal income tax rates; he reduced payroll tax withholding for certain individuals and gave businesses a tax credit for hiring new workers. Both actions have proven to have little stimulative impact. Marginal rates were not “cut” during the last four years.
Taxes are set to automatically surge to pre-2003 levels at the outset of next year if action is not taken to correct course. This is referred to by many as the “fiscal cliff” or the more colloquial “Taxmageddon.”