The Wall Street Journal writes an extremely fair, helpful, and succinct review of Obama’s tax proposals. The author helps readers understand why Obama claims to give tax cuts to 95% of Americans: by “tax cut” Obama includes tens of billions of dollars in government handouts that are disguised by the phrase “tax credit.” If you think Obama is somehow better for the economy, this article is a must read. Don’t forget to look at the chart. It is not too hard to understand: look what happens at about the $45,000 mark: your marginal tax rate goes up. This disproportionally punishes low-income workers for earning raises or bonuses –cutting off the incentive for achievement and growing one’s income:
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.
Some families with an income of $40,000 could lose up to 40 cents in vanishing credits for every additional dollar earned from working overtime or taking a new job. As public policy, this is contradictory. The tax credits are sold in the name of “making work pay,” but in practice they can be a disincentive to working harder, especially if you’re a lower-income couple getting raises of $1,000 or $2,000 a year. One mystery — among many — of the McCain campaign is why it has allowed Mr. Obama’s 95% illusion to go unanswered.
Read the whole thing.