Suspending Disbelief on Tax Policy

Bill Clinton’s state of the union speeches encouraged running tallies of impossible promises. Everybody got more, at no cost to anybody. Obama’s tax policy has that feel. There are so many ways to massage the numbers that the various claims are almost as impossible to assess as the likelihood that the candidate will actually follow through once in office.
Take one example. According to Obama’s tax policy fact sheet (PDF; emphasis added):

Obama’s plan will cut taxes overall, reducing revenues to below the levels that prevailed under Ronald Reagan (less than 18.2 percent of GDP). The Obama tax plan is a net tax cut — his tax relief for middle class families is larger than the revenue raised by his tax changes for families over $250,000.

A look at the table on page 24 of the Tax Policy Center report (PDF) that Obama uses to support his claims, however, reveals that this is true “against current law,” but false “against current policy.” The former compares the candidate’s plan to the reality if Bush’s tax cuts expire, and it results in a $2,796,400,000 decrease in tax revenue under Obama’s plan. The latter compares the plan to a scenario in which Bush’s tax cuts remain, and in this case, Obama’s plan actually increases tax revenue by $778,300,000.
The long and short of the matter is that, even in this sunniest, most gratuitously promissory version of a possible tax policy, Obama is going to increase taxes from what Americans are currently paying. McCain, by contrast, will cut taxes by any measure.

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15 years ago

James Pethokoukis of US News discusses a Dem proposal to replace 401Ks with a mandatory savings plan at 5% of salary. This would pay 3% (if inflation adjusted – not a bad return really). But it would be invested in government bonds and would be subject to the whims of our congressional overlords. I think the net effect would be to support one ponzi scheme – social security – with another – a mandatory savings plan. The rising generations of Americans would then have to wonder about whether there will be anything for them in two programs instead of one.

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