Thursday, July 19, 2012

When a Tax Increase is Not a Tax Increase

    Repeating a claim that has been around in some form at least since January, the Barack Obama Twitter account tweeted this on Wednesday:

    The source for this claim is an analysis by the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution.  The president's claim about about Romney's plan raising taxes on 18 million middle-class Americans comes from one sentence fragment of the analysis: "...about 11 percent of tax units would see their 2015 taxes go up an average of nearly $900..."  This fragment is pulled out of this passage:
Compared with the current law baseline, the Romney plan (absent base broadening) would cut taxes for about three-fourths of taxpayers by an average of more than $7,000. In contrast, compared with current policy, about 11 percent of tax units would see their 2015 taxes go up an average of nearly $900 while 70 percent would get tax cuts averaging almost $4,300.  [emphasis added]
So what about those increases on the 11% (or, with 165 million filers in the U.S., that’s about 18 million people)?  In May, Politifact weighed in on the matter when Obama claimed that Mitt Romney has "proposed cutting his own taxes while raising them on 18 million working families."  They rated that statement as "mostly true."  But in doing so, Politifact made the following observations:
Romney’s tax plan also allows the expiration of tax cuts enacted in the economic stimulus package, including:
  • The American Opportunity Tax Credit raises the maximum education tax credit from $1,800 to $2,500 and it makes the credit partially refundable so low-income people who don’t pay any taxes would still benefit.
  • The stimulus bill also increased the Earned Income Tax Credit for low-income working families from 40 percent to 45 percent. An extension enacted in 2010 increased the maximum credit for families with three or more children from $5,236 to $5,891 in 2011.
  • The child credit, a tax benefit to offset the cost of raising a child, is a partially refundable credit of up to $1,000 per child. Recent legislation lowered the threshold for qualifying, so that working families with earnings above $3,000 qualify for at least a partial credit.
  • These tax cuts provide substantial cuts for low-income taxpayers. And since Romney’s plan would allow them to expire, that’s who would see a tax increase under his proposal. (We are defining "working families" as tax filers or non-filers who receive a benefit from those tax cuts.)
    In other words, in all likelihood, a substantial number of that 18 million do not pay any federal taxes at all to begin with.  They are only going to see a reduction in the amount given to them by the government via refundable tax credits.  By this logic, a reduction in welfare payments is a tax increase on welfare recipients.  And "18 million middle-class Americans"?  How many middle-class Americans are "low-income people who don’t pay any taxes"? Or would be talked about as "working families with earnings above $3,000"?  Or have such low income that they are "non-filers"?  The president "middle-class" part of the claim does not appear in the Tax Policy Center's analysis but rather seems to have appeared out of thin air.  But it makes a great tweet.

    Certainly there is room for debate on how taxes should be cut and raised and on whom.  And might there be some in the middle-class whose taxes would rise under Romney's plan?  Perhaps so.  But are there so few clear and unambiguous claims that the president can make about his own record or about Governor Romney's plans that he must continually resort to distortion?  Silly question?

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