It’s a clever pitch, because it lets him pose as a middle-class tax
cutter while disguising that he’s also proposing one of the largest tax
increases ever on the other 5%. But how does he conjure this miracle,
especially since more than a third of all Americans already pay no
income taxes at all? There are several sleights of hand, but the most
creative is to redefine the meaning of “tax cut.”
When you pay no income tax, yet still receive a “tax cut,” that’s known as “welfare.” Or, to use a more “Chicago” term (from the politics, not the musical), “vote-buying.” But there’s a catch, for those working families who work a little too much:
Because Mr. Obama’s tax credits are phased out as incomes rise, they
impose a huge “marginal” tax rate increase on low-income workers. The
marginal tax rate refers to the rate on the next dollar of income
earned. As the nearby chart illustrates, the marginal rate for millions
of low- and middle-income workers would spike as they earn more income.
The Obama economic plan: punish high income earners by confiscating their income, while discouraging low income earners from trying to earn more. There’s a recipe for success! Next up, the Smoot-Hawley tariff!