Monday, October 13, 2008

The Five Percent Nation of Taking The Bone

"In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it. "
- Alexis de Tocqueville

One of the key themes of the Obama campaign is that despite the Republicans' fear mongering about him raising taxes, in fact 95% of Americans will get a "tax cut" under his plans. An editorial in today's WSJ pulls back the curtain on Obama's 95% Illusion:

Here's the political catch. All but the clean car credit would be "refundable," which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer -- a federal check -- from taxpayers to nontaxpayers. Once upon a time we called this "welfare," or in George McGovern's 1972 campaign a "Demogrant." Mr. Obama's genius is to call it a tax cut.

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.

The total annual expenditures on refundable "tax credits" would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center. This means that the tax-credit welfare state would soon cost four times actual cash welfare. By redefining such income payments as "tax credits," the Obama campaign also redefines them away as a tax share of GDP. Presto, the federal tax burden looks much smaller than it really is.

The political left defends "refundability" on grounds that these payments help to offset the payroll tax. And that was at least plausible when the only major refundable credit was the earned-income tax credit. Taken together, however, these tax credit payments would exceed payroll levies for most low-income workers.

Cutting taxes for people who don't pay taxes? Brilliant. Say what you will about Obama's real motives, but you have to give him his due for so cleverly packaging it. It's almost as if he were taking it right out of a playbook.

While the media characterizations of "rage" and "hostility" among Republicans are ridiculous on their face, it is true that there is a strong degree of frustration with the way that the McCain campaign has performed of late. Unlike some, my frustration doesn't lie with McCain's unwillingness to bring up Obama's past associations. While there definitely is some there there, at this point of the campaign it doesn't seem to be a productive path to go down. The way the media is playing down these revelations and mostly choosing to ignore elements that don't fit their fixed narrative of Obama's past means that trying to bring them out will not likely have much of an impact with voters.

But what I can't understand is why McCain has allowed Obama to trumpet this 95% tax cut message again and again without calling him on it. This message is killing McCain among pocketbook voters--an increasingly large block given recent economic events--and taking all the steam out of McCain's arguments that an Obama administration would make the economic environment worse both at a macro and micro level. The Journal shares my befuddlement:

One mystery -- among many -- of the McCain campaign is why it has allowed Mr. Obama's 95% illusion to go unanswered.

Let's hope this isn't a mystery that McCain takes to his political grave. In the immortal words of the Bally Eight Ball Deluxe pinball game, it's time to quit talkin' and start chalkin'. Or, while on the subject of graves, perhaps McCain could use some paraphrased inspiration from Herb Brooks, "If you lose this debate, you'll take it to your f***ing grave."

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