Wednesday, October 22, 2008

Tax Cuts and Welfare   [Ramesh Ponnuru]

In recent days, Senator McCain, along with many of his conservative supporters, has been arguing that the “tax cuts” that Senator Obama is promising in many cases amount to “a government giveaway” rather than actual tax cuts. The argument is that since people with no or low income-tax liability would be eligible for Obama’s proposed tax credits, those credits are disguised spending.

 

I don’t think that McCain’s tactic is going to work politically even if it is correct (and I’m not sure it is correct). First, he is himself proposing some tax credits that would be available to people with low or no income-tax liability. Second, opposition to spending, particularly spending on working-class voters, does not typically generate votes for Republicans. Third, McCain’s argument depends on a distinction between income taxes and payroll taxes: A tax credit that offsets income taxes is counted as a tax cut, while a tax credit that offsets payroll taxes isn’t. Whether or not voters should distinguish between payroll and income taxes, I’m not sure that they actually do. If Obama is promising to let people see their take-home pay go up and their withholding go down on their pay stubs, they’re going to think it’s a tax cut. (Which isn’t crazy of them.)

 

I think it would make more sense for McCain to say that Obama’s health-care plan would involve higher taxes on a lot of workers; that his tax credits would raise tax rates on almost everyone; that his tax increases on high earners would hurt the economy; and that the tax increases that would result from the combination of a President Obama and a Democratic Congress would end up being more extensive than advertised. I suspect it would be a more effective critique.

10/22 10:28 AMShare