Friday, April 17, 2009
Obama on Tax Day
Obama’s Tax Claims Contradict Reality
by Curtis Dubay
President Obama marked Tax Day with a speech touting his tax policies. He made several claims about how his policies will improve the economy, most of which don’t hold up under close scrutiny.
Here are a few of the more egregious examples:
President Obama claimed the tax cuts in the mis-labeled “stimulus” bill are the most progressive in history. This is true because the so-called stimulus created the Making Work Pay Credit and expanded the Child Tax Credit and the Earned Income Tax Credit. All these credits are refundable, so they send checks to tax filers who pay no income tax. This is income redistribution that does nothing to stimulate the economy.
President Obama also claimed that his tax policies cut taxes for the most number of workers ever. This is flat out false. The credits in the so-called stimulus phase out for anyone making over $95,000 ($190,000 for married filers), so a large number of workers are excluded from claiming any portion of them. The 2003 tax cuts applied to all workers because it reduced all income tax rates. It also did not limit the tax cut to earned income, as the stimulus tax cut did, and exclude income from social security and pensions. By all measures the 2003 tax rate reductions applied to more workers and taxpayers than the stimulus tax cuts.
President Obama stated that the tax cuts will boost demand and stimulate economic growth. The tax cuts will not stimulate economic growth because they are economically identical to spending. And spending does not stimulate economic growth because the money must first be borrowed or taxed out of the economy before it can be spent by the government. No new demand is created. Income is just shifted from one sector of the economy to another.
Lastly, President Obama said the tax cuts will create or save 500,000 jobs. The latest jobs figures contradict this claim. The economy shed 663,000 jobs in March. The analysis used to concoct the number of jobs created by the so-called stimulus has already been shown to be fatally flawed.
The tax cuts in the so-called stimulus will not stimulate the economy. President Obama chose to pursue tax policies that redistribute income to low-income tax filers instead of cutting tax rates to encourage economic growth. By doing so, he missed an opportunity to actually create jobs and put more money in the pockets of the people he wants to help.