Monday, the Wall Street Journal ran a column criticizing parts of Obama’s tax plan:
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."
The column goes on to point out that many of the “cuts” are “refundable credits” which, the column argues, amount to handouts to lower-income families (like the handout checks earlier this year, folks are generally eligible even if they have no tax liability)…and claims for reducing the tax burden as a share of GDP are achieved by accounting silliness.
The column also includes the chart at the right, which claims to depict the marginal tax rates for a hypothetical family under Obama’s tax plan.
Both the current and “Obama” lines look rather wacky which, to me at least, helps argue for tax simplification.
Presumably the author of the column is trying to argue against the Obama tax plan by virtue of the effective marginal rates under the proposal being higher for middle incomes than they are under current tax law.
That’s an OK point to make, but it is an incomplete picture given the lack of information on the effective tax rates under $25k. If you’re starting from a lower base, higher marginal rates can still lead to lower tax burdens.
A more interesting chart, I think, is one that ran in the Washington Post a few months ago. The particulars of the candidates’ plans may have been tweaked since the chart ran, but I suspect that the story is the same. (Click on the image for a better view.)
A few alternate views of that chart can be found at the Freakonomics blog, where Justin Wolfers tweaks the chart to reflect population and tax-paying distribution.
Sadly, I haven’t seen published any examination of average tax rates under the two proposals. However the data is available to build one myself:
As much as I’ve come to be annoyed by the guy, McCain’s plan doesn’t seem quite so nuts when presented this way. True, there is room for discussion about how progressive a tax scheme should be, and that question could easily, quickly devolve into an Obama v. McCain debate, but that’s beyond the scope of this post.
If you want plenty of information comparing the tax proposals, you may want to see the Tax Policy Center’s analysis, which contains more stats than you can shake a stick at, including this sobering chart:
Shouldn’t we be troubled by a lack of detailed discussion of how both candidates plan to offset the revenue decreases?
