Obama and Taxation

Obama has been attacked on the issue of taxation. The following is an article copied from www.factcheck.org.

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McCain released three new ads with multiple false and misleading claims about Obama's tax proposals.

• A TV spot claims Obama once voted for a tax increase "on people making just $42,000 a year." That's true for a single taxpayer, who would have seen a tax increase of $15 for the year – if the measure had been enacted. But the ad shows a woman with two children, and as a single mother, she would not have been affected unless she made more than $62,150. The increase that Obama once supported as part of a Democratic budget bill is not part of his current tax plan anyway.
  
  
• A Spanish-language radio ad claims the measure Obama supported would have raised taxes on "families" making $42,000, which is simply false. Even a single mother with one child would have been able to make $58,650 without being affected. A family of four with income up to $90,000 would not have been affected.
  
  
• The TV ad claims in a graphic that Obama would "raise taxes on middle class." In fact, Obama's plan promises cuts for middle-income taxpayers and would increase rates only for persons with family incomes above $250,000 or with individual incomes above $200,000.
  
  
• The radio ad claims Obama would increase taxes "on the sale of your home." In fact, home-sale profits of up to $500,000 per couple would continue to be exempt from capital gains taxes. Very few sales would see an increase under Obama's proposal to raise the capital gains rate.
  
  
• A second radio ad, in English, says, "Obama has a history of raising taxes" on middle-class Americans. But that's false. It refers to a vote that did not actually result in a tax increase and could not have done so.

These ads continue what's become a pattern of misrepresentation by the McCain campaign about his opponent's tax proposals.

Update, Aug. 12: The tax falsehoods continued with the release of a McCain Web ad Aug. 11 claiming that the "perks" of joining the Obama "fan club" include "a tax incease for everyone earning more than $42,000 a year."

Analysis

Sen. John McCain's campaign released the 30-second spot Aug. 8. Campaign spokesman Brian Rogers said the ad would be running in Colorado, Iowa, Michigan, Missouri, Nevada, New Hampshire, New Mexico, Ohio, Pennsylvania, Virginia and Wisconsin.

The ad continues McCain's pattern of misrepresenting Sen. Barack Obama's tax proposals as falling on middle-income families. It claims that Obama "promises more taxes on small businesses, seniors, your life savings, your family." But that's untrue for the vast majority of small businesses, seniors and individual taxpayers, who would see their taxes go down under Obama's actual plan. He proposes to increase taxes only for those with more than $250,000 in family income, or $200,000 in individual income.

Better, But Still Deceptive

We are pleased to see that in this ad McCain has corrected one earlier misrepresentation. He and others in his campaign have been saying for weeks that Obama once voted for a Democratic budget bill that McCain falsely claimed would raise taxes on persons making as little as $32,000 a year. We challenged that false claim in an article posted July 8. In this ad, McCain says Obama voted to raise taxes on persons making "just $42,000 a year," which is true for some but not all. Yet the ad still misleads.

A Misleading Picture

The measure Obama supported contained a provision – which is not part of his current tax proposals – that would have increased the rate paid by those who have taxable income high enough to fall into the 25 percent tax bracket. The 25 percent rate would have increased to 28 percent, as it was before the Bush tax cuts. The effect would have been to increase taxes for a single taxpayer with as little as $32,550 in taxable income in 2008, after all deductions and exclusions from total annual earnings.

But that works out to be $41,500 a year in total income for a single taxpayer with no dependents who takes the standard deduction and exemption allowed by the tax code. So it's true that a single taxpayer making $42,000 this year would see an income tax increase – of $15. That assumes the provision Obama voted for had been enacted and assumes further that the taxpayer did not qualify for more than the standard deduction.

But the McCain ad misleads with a strong visual message. The $42,000 claim is true for a lone taxpayer, but it is not true for the woman who is pictured in the ad while the announcer is speaking. She's reading to two small children, apparently her own. If she is supposed to be a single mother of two, then she would be able to make as much as $62,150 in total income in 2008 without being affected by the measure Obama once supported. She would file as a "head of household" with more generous tax brackets and standard deductions than for a single filer, and she would also qualify for exemptions for herself and her two children. (She would also qualify for a $1,000 credit for each child, since they both are obviously under 17, but this would be true whether or not the 25 percent bracket had been increased to 28 percent.)

Furthermore, if viewers are to believe that the woman in McCain's ad is married and files taxes jointly with her husband, the couple could make as much as $90,000 this year without being affected. And anyway, as noted earlier, Obama isn't proposing to implement any such increase in the 25 percent bracket.

(Tax tables for 2008 can be found here, including the tax brackets, exemptions and exclusions that apply to income earned this year.)

The TV ad also says that Obama "promises more taxes on small business, seniors, your life savings, your family." This statement is simply not true for the vast majority of viewers who will see it. Obama, in fact, promises to deliver a $1,000 tax cut for families making up to $150,000 a year, and he says he would increase income tax rates, capital gains tax rates and taxes on dividends only for those with family incomes over $250,000 a year, or for single taxpayers making over $200,000.

Tax Deception en Español

McCain also released a 60-second, Spanish-language radio ad Aug. 8 with additional deceptions, claiming that Obama would raise taxes on listeners' income, savings and home sales, and falsely claiming that he had voted to increase taxes on "families" making $42,000 a year.

John McCain 2008 Radio Ad:
"Are You Ready For Obama?"

(English translation supplied by McCain campaign)

Announcer: With the economy as bad as it is, gas prices going up, home foreclosures, and jobs being lost, we need to be careful about who we pick as our next president.
No doubt, Barack Obama is a popular figure, a celebrity who says the right thing. But will he do the right thing?
So here's the question you need to ask yourself, in these tough economic times, are you ready for a president who voted for higher income taxes on working families making $42,000 a year?
Are you ready for Barack Obama, for his tax plans that will hurt senior citizens?
Are you ready for the higher taxes on income, savings and the sale of your home that Barack Obama promises?
It's not that you're not ready. Barack Obama is not ready yet. Because when it comes to the economy, experience matters, and he just doesn't have it.
He says he'll give you change, but that's what he'll leave you with.
McCain: I'm John McCain and I approve this message.

The English-language translation supplied by the McCain campaign says Obama voted for higher taxes on "working families" making $42,000 a year. (In Spanish, it says Obama “voto para aumentarle los impuestos a las familias que ganan 42,000 dolares al año.) The Spanish for "working" does not actually appear in the ad, but either way the claim is false.

As noted, what Obama once supported would have increased taxes for a single taxpayer at that income level, but not for a family. The smallest possible "family" would be a single parent with a single child, and such a single parent would have to make $58,650 to have been affected. As noted, a family of four would have to make $90,000. And in any case, Obama's plan would cut taxes for families at all those levels, not increase them.

The ad also falsely claims Obama proposes higher taxes on "the sale of your home." In fact, neither Obama nor McCain propose any change in the current exemption for home sales, which allow all profits to go untaxed up to $500,000 for a couple or $250,000 for a single person, provided that the home has been a primary residence at least two of the previous five years. Obama has proposed an unspecified increase in the tax rate for capital gains, but this would fall only on home-sale profits that exceed the current exclusion and would therefore affect only a very small percentage of all sellers.

False "History"

Later the same day, the McCain campaign released another 60-second radio ad, titled "Recipe." This one is in English, and it's also misleading.

John McCain 2008 Radio Ad:
“Recipe”

Announcer: Life in the spotlight must be grand for Barack Obama. But is he ready to lead in tough economic times?
Official records document, Barack Obama has a history of raising taxes – even on middle class Americans making just $42,000 a year.
If elected president, Obama's promises would mean even more taxes on income, electricity, oil, small business, seniors, your life savings, your family.
Painful taxes when times are tough enough.
The Las Vegas Review-Journal calls Obama's ideas "a recipe for economic disaster."
The Washington Post says Obama's policies are "poorly crafted" and will result in "higher prices at the pump."
And The Wall Street Journal reports Obama's plans will "stunt small business" and threaten "America's economic competitiveness."
More taxes. Higher gas prices. A recipe for economic disaster.
That's the real Obama.
McCain: I'm John McCain and I approved this message.
Announcer: Paid for by John McCain 2008.

It says: “Official records document, Barack Obama has a history of raising taxes – even on middle class Americans making just $42,000 a year.” But that's false. No taxes were increased, and the vote that the McCain campaign refers to could not by itself have resulted in any increase on anybody.

The measure for which Obama voted was a budget bill for fiscal 2009. Budget bills set revenue and spending targets for appropriations and tax-writing committees, but don't by themselves legislate any changes in taxes or spending.

It is correct to say that Obama’s vote showed a preference for the Democratic budget package, which included an increase in the 25 percent tax bracket, over the Republican alternatives. But it is false to say that this amounts to “a history of raising taxes,” since no taxes were actually increased. It is also misleading, as we've noted, because Obama has campaigned consistently on a promise to cut taxes for most taxpayers while raising them only on the most affluent.

A Continuing Pattern of Deceit

These three new McCain ads continue what has become a pattern of deceit, with McCain repeatedly misrepresenting what Obama is proposing.

Here are some of McCain's previous false claims, with links to previous analyses:

• McCain falsely claimed Obama's plan would increase taxes on 23 million small-business owners, when the vast majority of them would get a cut. Any increase would actually fall only on the most affluent, a few hundred thousand business owners.
  
  
• McCain falsely claimed Obama "says he'll raise taxes on electricity," though Obama has said no such thing and his tax plan contains no proposal for a tax on electricity.
  
  
• As noted already, McCain falsely claimed Obama once voted for a Democratic budget bill that called for raising taxes on persons making as little as $32,000 a year, when in fact the proposal would not have affected anyone with total income under $41,500 a year, or $83,000 for a married couple with no children.
  
  
• McCain stated that Obama would raise taxes "if you have an investment for your child’s education or own a mutual fund or a stock in a retirement plan." This was found to be "false" by our colleagues at Politifact.com, and we concur.
  

McCain has been twisting tax facts about Obama as far back as June 10, when he gave a speech to a small-business gathering saying: "Under Senator Obama's tax plan, Americans of every background would see their taxes rise." There may be persons of "every background" among the affluent, but McCain's phrasing was misleading. These ads continue his long-running pattern of deception on taxes."

Update, Aug. 12: McCain misrepresented Obama's tax plan again with a Web ad released Aug. 11. Mocking Obama's popularity, a narrator says, "Now, you too can join 'The One's' fan club. ...The perks are amazing. Like a tax increase for everyone earning more than $42,000 a year." As noted, Obama proposes no such thing. Even the budget bill he once voted for called for an increase only on single taxpayers at that income level, not "everyone."

-by Brooks Jackson

Sources

"Individual Income Tax Brackets, 1945 - 2008." 4 November 2007. Urban-Brookings Tax Policy Center, 7 July 2008.

U.S. Internal Revenue Service, "Topic 701 - Sale of Your Home," Web site accessed 8 Aug 2008.

Len Burman, et. al. "An Updated Analysis of the 2008 Presidential Candidates' Tax Plans." Urban-Brookings Tax Policy Center, Revised 23 July 2008.