Sen. Barack Obama proposes a welfare plan that will transfer billions of dollars from those who earned it and to others who didn’t.
He doesn’t call his plan “welfare” or even “hand-outs,” which would be accurate descriptions. Instead, Obama portrays this massive redistribution of wealth as “tax cuts,” which is more palatable to voters. Who could object to tax cuts?
The presidential aspirant from Illinois says he will “cut taxes for 95 percent of workers and their families … .” The first of many problems with this claim is that only about 62 percent of U.S. households pay any income taxes. How then under Obama’s plan can most of the other 38 percent who already pay no income tax also get a tax cut?
The answer is their tax liability will be reduced by giving them tax credits. Most people recognize the absurdity of lessening a burden that’s already zero. But, after all, it is an election year.
In one sense, 95 percent of American workers and their families will benefit from this scheme with either less money going out or more coming in. But they profit only at a huge cost for the remaining 5 percent, who happen to earn more income than Obama thinks is proper.
That small minority of the populace will be stuck with the bill. Their taxes will increase in order to provide for the cash not collected from or handed out to 95 percent of us. This no doubt has a short-sighted appeal for many of the 95 percent.
Except by degree, this also is not new to Washington, where people routinely send their money in order that the government can send it back out again to people who didn’t earn it.
In 1999, about 30 million tax filers had no income tax liability after taking advantage of credits and deduction. The number had mushroomed to 44 million by 2006, according to the Tax Foundation, a nonprofit organization that has provided information about government finance since 1937.
“The nation’s tax and spending policies redistributed more than $1 trillion in income from the top 40 percent of American households to the bottom 60 percent of households,” the Tax Foundation reports.
Obama is proposing to buy the support of a broad swath of voters with the money earned by a narrow band of America’s most wealthy. He assures voters that no family making less than $250,000 a year will see an increase in taxes.
Why $250,000? The distinction is probably as arbitrary as the rest of the numbers in his tax plan. Why eliminate taxes for seniors making less than $50,000, as he proposes? Why not $30,000 or $75,000? Why provide a 10 percent mortgage interest tax credit instead of 5 or 20 percent? Why reduce taxes by $3,700 on married couples making $75,000 with two children, one in college? Why not $5,000 or $1,000?
We suspect Obama’s metrics have more to do with how many votes he can acquire, rather than how much fairness he can inject into the tax system. And he will acquire those votes by taking, then spending, other peoples’ money.
There are other costs. The Heritage Foundation says Obama’s tax proposal would increase the U.S. top marginal income tax rate from 42.7 percent to 56 percent, making it comparable to Sweden’s 56, Germany’s 57 and Belgium’s 60 percent. Part of the price paid in those economies, says the Heritage Foundation, is high unemployment from 7 to 9.8 percent. Moreover, high tax rates also encourage capital and income flight to lower-taxed areas.
But there’s an even more costly price in Obama’s tax proposal. We favor reducing taxes as a matter of fairness. But there is nothing fair about a minority footing the entire bill while large segments or even majority segments of the population pay little if any taxes or receive government handouts.