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COLUMNISTS
TODAY'S STORIES
14.08.2008
Obama on Taxes

Jason Furman and Austan Goolsbee fill in some of the details of Barack Obama's tax plan in their op-ed in today's Wall Street Journal. There's lots of stuff in there that's of interest: They point out that John McCain, unlike Obama, offers no tax relief at all to a huge chunk of the working class. (Indeed, Obama's tax plan is better for the bottom 80 percent of Americans on the income ladder, despite McCain's outright lies about Obama's proposals.) Furman and Goolsbee also note that under Obama's plan, federal tax revenue would be only 18.2 percent of GDP, less than it was during that noted era of oppressive taxation, the 1990s. But the point that deserves perhaps the most emphasis is this:

Sen. Obama does not support uncapping the full payroll tax of 12.4% rate. Instead, he is considering plans that would ask those making over $250,000 to pay in the range of 2% to 4% more in total (combined employer and employee). This change to Social Security would start a decade or more from now and is similar to the rate increases floated by Sen. McCain's close adviser Lindsey Graham, and that Sen. McCain has previously said he "could" support.

Conservatives have seized on Obama's payroll tax rhetoric to claim that he does support uncapping the full payroll tax rate, which would result in "European levels" of taxation, with marginal rates in excess of 55 percent. This is simply not true--Obama isn't proposing anything approaching European tax rates. You'd think conservatives would be able to tell the difference between a modest tax increase on a small group of increasingly propserous people and a wholesale reversion to the confiscatory pre-Reagan marginal rates, but apparently they lack either basic mathematical proficiency or intellectual honesty.

Update: The author of the Heritage paper I link to writes in comments that his reference to "European levels" of taxation referred only to top marginal rates, not to overall taxation as a percentage of GDP (the table I linked to above). Fair enough. Here's the most recent chart I can find after some quick Googling of top marginal rates by country [Update II: Found newer chart, from 2005]. It still looks to me like under Obama's tax proposal, the top marginal rate in the U.S. would be well below the top marginal rate in most Western European countries.

--Josh Patashnik

Posted: Thursday, August 14, 2008 1:02 PM with 8 comment(s)

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wgcreeley said:

"You'd think conservatives would be able to tell the difference between a modest tax increase on a small group of increasingly propserous people and a wholesale reversion to the confiscatory pre-Reagan marginal rates, but apparently they lack either basic mathematical proficiency or intellectual honesty."

That would be the latter, I believe.

August 14, 2008 1:38 PM

ndmackenzie said:

Josh Patashnik writes:

-- apparently [conservatives] lack either basic mathematical proficiency or intellectual honesty.

The "or" should be an "and."

August 14, 2008 1:51 PM

roidubouloi said:

Oh, come on, Josh, the Republicans know the difference, but they have no interest in reality, only in another smear.  It matters not one whit whether the smear bears any relationship to the truth, only whether they think they have a chance to make it play.  Standard operating procedure for these guys.

August 14, 2008 1:52 PM

Wandreycer1 said:

Wow, an article in the press straight up calling McCain's lies lies.  What a concept.

Great post Josh.

August 14, 2008 1:58 PM

sdemuth said:

Shame on Obama for NOT supporting a full uncapping of the payroll tax.  The cap, in whatever form, is a disgrace.  My college-age son washing dishes over the summer pays twice the overall Social Security taxation that I do.  Ditto the nurse down the road.  There is no possible way to explain this as a just taxation scheme.

August 14, 2008 2:25 PM

sdemuth said:

I meant, of course "overall Social Security taxation rate."  I do pay more in actual $. ;-)

August 14, 2008 3:19 PM

heritage2004 said:

"Conservatives have seized on Obama's payroll tax rhetoric to claim that he does support uncapping the full payroll tax rate, which would result in "European levels" of taxation, with marginal rates in excess of 55 percent. This is simply not true--Obama isn't proposing anything approaching European tax rates."

I wrote this paper you cite based on Senator Obama's speeches that spoke of lifting the payroll tax cap.  Senator Obama's campaign did not provide many specifics other than to say a higher payroll tax cap was only one of a variety of options.  I inserted an update with the disclaimer from the Obama campaign based on information they provided me and other groups such as the TPC.  Today's op-ed is more illuminating but  they don't answer the question whether the 2 to 4 percent is on only wages or an all forms of income.  

As for your latter sentence, I am writing about marginal rates.  You are talking about about taxes as a % of GDP.  These are two completely different subjects entirely. Since you accuse me of intellectual dishonesty, I believe it is only fair that you link to a chart that compares apples to apples instead of oranges.  Nowhere in the paper do I focus on taxes as a percent of GDP.  I focus on marginal rates and the dangers of high top rates through the entire piece.  The US top marginal rate would be around 48% with the 4% surtax.  

Rea S. Hederman Jr.

August 14, 2008 3:38 PM

jhildner said:

I would like to see Obama ads saying that McCain is lying.  Start by naming the attack -- his ads in black and white, his own words (tire guage is not an energy plan), etc.  Example:  "Another attack from John McCain, and another lie.  John McCain says that Barack Obama wants to raise your taxes if you make $42,000 per year.  Flat out lie.  The Obama tax plan would *cut* taxes for 95 percent of American workers and families, and no family with an income under a quarter of a million dollars would see their taxes increase.  According to the idnependent Tax Policy Center, Obama's plan provides three times the middle class tax relief than John McCain's plan provides.  Meanwhile, as ordinary Americans face tough economic times, John McCain promises to out-do George Bush in handing out tax breaks to the rich that we cannot afford.   (Bush-McCain hug.)  The same old Republican policies.  Is McCain ready to lead America in a new direction?  Is he even ready to tell the truth?"

Cut to Obama, in person.  (How come ads never have the candidate speaking for him/herself?)  "I'm Barack Obama, and I approved this message, because the challenges we face, on the economy, on energy, on health care, and on America's leadership in the world, are too important for the same old lies and Washington tricks.  At barackobama.com, learn more about our comprehensive and concrete proposals for affordable health care, middle-class tax relief, and our strategies to relieve pain at the pump.  We are proposing smart investments in America's future, while my opponent promises more of the same.  It's time for honest answers to our challenges...."

Or something like that.  You could swap out the details, including the false attack.

August 14, 2008 4:48 PM