Again, Obama is falsely accused of planning to impose more taxes on the middles class. Here is an unbiased account of Obama's policy. www.factcheck.org

"A McCain ad wrongly claims Obama plans "painful tax increases" for working families. And who's talking about deficits?

Summary

McCain's new ad puts another stitch in what we've called his pattern of deceit on Obama's tax plan. This one claims Obama and congressional Democrats plan to push forward "painful tax increases on working American families" and that they will bring about "years of deficits," "no balanced budgets" and "billions in new government spending."

The ad is plain wrong about higher taxes on working families. In fact, Obama's economic plan would produce a tax cut for the majority of American households, with middle-income earners benefiting most. As for "years of deficits," exactly the same claim could be made about McCain's program. It's unlikely either Obama or McCain would balance the budget, and both are projected to increase the debt by trillions.

Analysis

We've already reported on at least three other ads, in both Spanish and English, from Sen. John McCain's campaign that distort his rival's tax policy. The ads claim that, for example, Democratic Sen. Barack Obama would raise taxes "on the sale of your home" and that he has a "history of raising taxes" and that he wanted to raise taxes on "families" making just $42,000 a year.

Claims like these have led us to say that McCain's campaign is engaging in a "pattern of deceit" when it comes to describing Obama's tax plan. This most recent ad fits right into the template.

Tax Counter-Spin

The ad says Obama and “out of touch Congressional leaders” plan to implement “painful tax increases on working American families,” and it shows an image of a family presumably upset about an impending tax increase. But, as we've reported numerous times, Obama proposes a tax cut for the vast majority of households.

John McCain 2008 Ad:
"Expensive Plans"

Crowd: Obama, Obama…
Announcer: Take away the crowds, the chants. All that’s left are costly words. Barack Obama and out of touch congressional leaders have expensive plans. Billions in government spending, years of deficits, no balanced budgets, and painful tax increases on working American families. They’re ready to tax, ready to spend, but not ready to lead.

We spoke with Len Berman, director of the nonpartisan Urban-Brookings Tax Policy Center, which has produced one of the most authoritative analyses of the two candidates’ tax plans. When we asked him if Obama’s claim that he would “cut taxes for 95 percent of all working families” was true, Berman told FactCheck.org that it was “consistent with our estimates.” Overall, the TPC found that Obama’s plan would produce a tax cut for 81.3 percent of all households, and a cut for 95.5 percent of all households with children.

Under Obama's plan, the TPC estimates that people (or couples) making between $37,595 and $66,354 a year would see an average savings of $1,118 on their taxes.

Under McCain's plan, on the other hand, those same individuals would save $325 on average — $793 less than the average savings under Obama's plan.

Put It on Our Tab

The ad also claims that Obama and congressional Democrats would bring about "years of deficits." But (and we've reported this before, too), the fact is both candidates' economic plans would fail to bring an end to deficit spending, and by that measure, McCain's is worse than Obama's. According to the TPC analysis, Obama's tax plan would increase the debt by $3.5 trillion by 2018, while McCain's plan would bring about a projected $5 trillion increase in the same time frame. The TPC also found that:

Tax Policy Center (Aug 28): Neither candidate’s plan would significantly increase economic growth unless offset by spending cuts or tax increases that the campaigns have not specified.

The Obama campaign maintains that the Tax Policy Center's estimates don't account for Obama's proposed spending cuts, including things like ending the Iraq war. But those cuts will not come close to balancing the budget, and Obama has avoided promising a balanced budget during his first term.

McCain, however, has said he will balance the budget by 2013. Experts remain skeptical. In early July, The New York Times quoted Robert L. Bixby, executive director of the Concord Coalition — a bipartisan fiscal responsibility advocacy group — as saying the claim was "unlikely":

Robert L. Bixby (as quoted by The New York Times, July 8): It’s feasible to balance the budget by 2013, but very unlikely under the policies Senator McCain has proposed. The spending cuts are far too vague to be counted on for significant savings and, even if they were more specific, I can’t see how they would come close to offsetting the level of tax cuts he recommends.

McCain senior economic adviser Douglas Holtz-Eakin sent The Washington Post's editorial board a copy of McCain's plan in support of the candidate's claim. But the board concluded, in its July 14 editorial, that the plan was "not credible."

So the ad's claims about deficit spending and "no balanced budgets"? They could be applied just as easily to McCain as to Obama and the Dems. And we're not sure McCain really wants to go there."

-by Emi Kolawole

Sources

Burman, Len, et. al. “An Updated Analysis of the 2008 Presidential Candidates’ Tax Plans: Revised August 15, 2008.” Tax Policy Center, 15 Aug. 2008.

Table T08-0182, Senator McCain’s Tax Proposals as Described by his Economic Advisors, Distribution of Federal Tax Change by Cash Income Percentile, 2009. Tax Policy Center, 19 July 2008.

Gleckman, Roberton Williams and Howard. "An Updated Analysis of the 2008 Presidential Candidates' Tax Plans." 28 August 2008. The Tax Policy Center. 29 August 2008

Urban-Brookings Tax Policy Center, "Table T08-0203 - Senator Obama's Tax Proposals of August 14, 2008: Economic Advisers' Version (No Payroll Surtax), Distribution of Federal Tax Change by Cash Income Percentile, 2009" 14 Aug 2008.

Rohter, Larry. Will the Real Tax-and-Spender Please 'Fess Up?. 13 Jun. 2008. The New York Times. 2 Sep. 2008.

Related Articles

FactChecking Obama

He stuck to the facts, except when he stretched them.

More Tax Deceptions

McCain misrepresents Obama's tax proposals again. And again, and again.

McCain's Small-Business Bunk

He claims 23 million small-business owners would pay higher tax rates under Obama. He's wrong. The vast majority would see no change, and many would get a cut.

The $32,000 Question

The McCain campaign falsely claims that Obama voted to raise income taxes on individuals earning "as little as $32,000 per year."

The following is from www.factcheck.org

"Republicans claim Obama "voted 94 times for higher taxes." But their count is inflated and misleading.

Summary

The McCain campaign and the Republican National Committee both claim that Obama has voted 94 times “for higher taxes.” We find that their count is padded.

After looking at every one of the 94 votes that the RNC includes in its tally, we find:

• Twenty-three were for measures that would have produced no tax increase at all; they were against proposed tax cuts.
  
  
• Seven of the votes were in favor of measures that would have lowered taxes for many, while raising them on a relative few, either corporations or affluent individuals.
  
  
• Eleven votes the GOP is counting would have increased taxes on those making more than $1 million a year – in order to fund programs such as Head Start and school nutrition programs, or veterans’ health care.
  

• The GOP sometimes counted two, three and even four votes on the same measure. We found their tally included a total of 17 votes on seven measures, effectively padding their total by 10.
  
  
• The majority of the 94 votes – 53 of them, including some mentioned above – were on budget measures, not tax bills, and would not have resulted in any tax change. Four other votes were non-binding motions related to conference report negotiations.
  

It's true that most of the votes the GOP counts would either have increased taxes for some, or set budget targets calling for such increases. But by repeating their inflated 94-vote figure, the McCain campaign and the GOP falsely imply that Obama has pushed indiscriminately to raise taxes for nearly everybody. A closer look reveals that he's voted consistently to restore higher tax rates on upper-income taxpayers but not on middle- or low-income workers. That's consistent with what he's said he'd do as president, which is to raise taxes only on those making more than $250,000 a year.

Analysis

In a June 9 press release, Tucker Bounds, spokesman for Sen. John McCain's campaign said that "during just three years in the U.S. Senate, Barack Obama has already voted 94 times for higher taxes." The same day, the RNC, which researched Obama’s votes and is the original source of the claim, issued its own release, saying "Obama Voted At Least 94 Times For Higher Taxes" and that he had voted "For A Tax Increase Approximately Once Every Five Days Congress Has Been In Session." A few days later, McCain adviser Douglas Holtz-Eakin and other campaign staffers repeated the charge, which was quoted in various news stories. We suspect we'll be hearing this figure a lot more as the campaign wears on.

If this type of claim sounds familiar, it’s because George W. Bush's campaign used a similar refrain against John Kerry in 2004, charging that Kerry voted for "higher taxes" a whopping 350 times. We found that claim to be incorrect as well. This time around, Republicans are using some of the same tricky accounting to beef up the number of votes.

Higher Than My Taxes Are Now?

By our count, about a quarter of these votes for "higher taxes" – 23 to be exact – are votes Obama cast against changing tax rates from what they were at the time. Taxes would not have gone up. They would have been "higher" only compared to the cuts being proposed.

The RNC admits as much in its documentation on the 94 votes, faulting Obama for voting nine times against lowering the capital gains tax rate, seven times against implementing tax incentives for small businesses, six times against lowering the estate tax and three times against repealing a more than decade-old increase in taxes on Social Security benefits, among other votes. The RNC counts these as votes "for higher taxes" even though Obama voted to keep taxes right where they were.

Win Some, Lose Some

Seven votes on the RNC's list were votes Obama cast for measures that called for lowering certain taxes broadly and would have paid for the cuts by raising taxes on high-income individuals or corporations. The RNC didn't give Obama credit for voting for the lower taxes, of course.

Two votes were in favor of a "windfall profit tax" on oil companies and handing out the revenue in the form of rebate checks or nonrefundable tax credits to the public. Another favored giving tax benefits to areas affected by Hurricanes Katrina, Rita and Wilma and extending several other tax relief provisions, all of it financed by closing corporate and individual "loopholes" and extending Superfund taxes on corporations, used to pay for toxic waste cleanups. Obama also voted for a refundable tax credit for farmers, paid for by closing a loophole that gives a foreign income tax credit to oil companies. Yet another of these pieces of legislation, an amendment to the 2007 energy bill, would have extended and expanded all kinds of renewable energy tax credits and covered the cost by increasing taxes on oil companies. All of the measures were rejected.

Raising Taxes? Or Wages?

Along the same lines, two of the items the RNC calls votes "against tax incentives for small businesses" were actually votes against Republican counter-measures to Democratic efforts to raise the minimum wage. While Democrats were voting for a measure to raise the minimum wage to $7.25, for example, Republicans offered a substitute that would have held the increase to $6.25 and thrown in a bundle of tax breaks for small businesses as well. Because Obama favored the higher wage package over the Republican alternative, the GOP and McCain count his vote against the GOP alternative as one for "higher taxes."

Higher Taxes for Whom? And for What?

Several of Obama's votes did indeed favor raising taxes above current levels. But in most cases these increases would have fallen on upper-income individuals or on corporations. And in many cases, the legislation in question called for increasing taxes in order to fund popular programs, a fact not mentioned by the Republican opposition researchers. One such amendment by Sen. Christopher Dodd to a 2006 bill, for example, proposed the creation of a "veterans hospital improvement fund," financed by increasing the capital gains and dividend tax rates on those earning $1 million a year or more. An amendment to a 2009 budget resolution called for restoring the income tax rate on million-dollar-a-year incomes to pre-2001 levels to fund children's education efforts, such as Head Start and school nutrition programs. Amendments to a 2007 budget resolution (S. Con. Res. 83) aimed to set aside $5 billion for emergency responders' communication equipment or funds for port security, both of which said they would be offset by "closing tax loopholes." Others called for increasing funding for a low-income home energy assistance program or restoring cuts slated for vocational education and student loan programs, paid for by closing "corporate tax loopholes."

What do you call a vote to raise taxes on couples earning more than $1 million a year in order to set up a fund to help children in poverty? We counted it, along with all of the other votes mentioned in the last paragraph, as a vote to increase taxes. But it was, of course, more than that.

Double, Triple and Quadruple Counting

The 94-vote list includes 17 votes that applied to only seven separate measures, effectively padding the GOP's list by 10. Two or three votes on the same measure are not uncommon in the Senate. The most egregious example is a series of four votes on amendment No. 4189 to a Senate budget resolution (S. Con. Res. 70) in March of this year. First, the Senate voted on the amendment (vote #45), and it was rejected. Then, it voted on a motion to table a motion to reconsider vote #45 (that's vote #46), and then voted on the actual motion to reconsider vote #45 (we're up to vote #47 now). And finally, the Senate voted on the same amendment again (vote #48). It was still rejected.

The RNC counts these as four separate votes for "higher taxes."

Non-Binding Votes

Worth noting is that most of the votes on the RNC's list could not have resulted by themselves in raising taxes. Of the total, 53 votes were on amendments to budget resolutions or the resolutions themselves. Budget resolutions merely set targets for tax-writing and appropriations committees and don't alter the tax code directly. Another four votes were on motions to instruct House-Senate conferees, which aren't binding either, and are seldom followed.

We agree that many of Obama's votes on these budget measures were clear statements of approval for increased taxes. But those 57 non-binding votes wouldn't have raised anybody's taxes.

The Final Tally

Cataloging some of these votes isn't cut-and-dried, and the exercise underscores how easily a campaign can spin the opponent's record. In the end, we listed votes on 54 measures under the "for higher taxes" category (and another seven votes in favor of lowering some taxes and increasing others); but even if the RNC used that figure in its claim, we'd have plenty to say about it. As we mentioned, most of those were measures to tax the rich or corporations; many aimed to fund government programs; and most didn’t actually raise taxes in and of themselves.

The standard we use is fairly generous to the GOP. Twelve votes by Obama in the RNC's list favored extending tax cuts that were slated to expire. We counted those as votes for increasing taxes, since taxpayers would see their rates increase as a result of failing to pass the legislation. Many Democrats argue that such a vote would not raise taxes above what current law provides, and therefore should not be counted as a vote for a tax increase. However, taxpayers aren’t privy to such philosophical legislative discussions and would indeed see their taxes increase if the cuts aren’t extended."

-by Lori Robertson

Sources

Sources for this article include THOMAS.gov, GovTrack.us and the Congressional Record for all 94 votes in question.

Obama has been accused of not supporting small business. In fact, many assert Obama will raise taxes on small business owners.

Here's the truth as determined by www.factcheck.org

"

He claims 23 million small-business owners would pay higher tax rates under Obama. He's wrong. The vast majority would see no change, and many would get a cut.

Summary

McCain has repeatedly claimed that Obama would raise tax rates for 23 million small-business owners. It's a false and preposterously inflated figure.

We find that the overwhelming majority of those small-business owners would see no increase, because they earn too little to be affected. Obama's tax proposal would raise rates only on couples making more than $250,000 or singles earning more than $200,000.

McCain argues that Obama's proposed increase is a job-killer. He has a point. It's true that increasing taxes on those at the top would leave them less money for other purposes, including investment and hiring in the case of business owners. But the number of business owners who would see their rates go up would be only a small fraction of what McCain says. Many would see their taxes go down.

Analysis

Sen. John McCain has been making this false claim over and over, starting with a July 7 speech announcing his "jobs for America" plan:

McCain, July 7: Senator Obama's tax increases will hurt the economy even more, and destroy jobs across this country. If you are one of the 23 million small-business owners in America who files as an individual rate payer, Senator Obama is going to raise your tax rates.

He repeated it in an address to the League of United Latin American Citizens the next day:

McCain, July 8: Keeping individual rates low isn't intended as a favor to wealthy Americans. 23 million small-business owners pay those rates, and taking more money from them deprives them of the capital they need to invest and grow and hire.

He said it again at a campaign event July 9:

McCain, July 9: If you are one of the 23 million small-business owners in America who files as an individual rate payer, Senator Obama is willing to raise your tax rates.

And he repeated it in the first of a planned series of radio addresses July 12:

McCain, July 12: If you are one of the 23 million small-business owners who files as an individual rate payer, watch out – because as your business grows, my opponent proposes to raise your taxes.

But repeating a falsehood doesn't make it true. McCain's 23 million claim is a bogus figure.

Outdated, Inflated, Inapplicable

To justify the 23 million figure, McCain spokesman Brian Rogers referred us to a press release by the U.S. Chamber of Commerce, which refers to "23 million small business owners" without citing a source. That is actually an outdated count of all the businesses in the United States, produced by the U.S. Census for 2002, when the Economic Census counted a total of 23,343,821 business firms of all sizes. Of those, 16,845 firms employed 500 persons or more, which still leaves just over 23.3 million classified as "small" by the widely accepted definition that we will use here.

That figure is six years out of date. The U.S. Small Business Administration Office of Advocacy estimates the total number of "small" firms with fewer than 500 workers reached 26.8 million in 2006. That's the most recent estimate. But it is also inflated. Since the total U.S. population was just under 300 million in 2006, it would mean that one in every 11 Americans – men, women and children – is a "small-business owner."

It turns out, SBA's estimate includes more than 20 million "nonemployer" firms, an unknown number of them sideline or hobby businesses run by persons who actually make their living some other way. Census and SBA count as a "small business" anyone who reported as little as $1,000 of business receipts. By that very broad definition, John McCain himself is a "small-business owner," because his tax return shows Schedule C income from book royalties. For that matter, Barack Obama would also be a small-business owner, by virtue of his book income. As would President Bush and Vice President Cheney, as we pointed out in 2004. Of the 26.8 million that SBA counts as "small businesses," fewer than 6 million are actually "employer firms" with any payroll.

From this, we must conclude that to arrive at his 23 million figure, McCain is counting mostly "business owners" with no workers, including those who simply report small amounts of income from sideline or freelance work. McCain is arguing that Obama's tax increase would "destroy jobs," but he's counting mostly firms that don't produce any.

That in itself is seriously misleading. If McCain wants to focus on the effects of Obama's plan on employment, he would do better to confine his count to employers – the just under 6 million firms that actually have workers. And even that figure wouldn't be applicable because Obama's tax increase wouldn't fall on all employers, only on those in the top two income tax brackets.

McCain Campaign's Statement

1. These small businesses are subject to Sen. Obama's pay or play health care plan: The tax will either be in the form of health insurance to
workers or cash to the government.

2. Further, even giving Obama the benefit of the doubt, if they make
over $250,000 and file as individuals or have capital gain or dividends, their taxes go up, as Obama has promised.

Note US Chamber cites 23 million figure: "The U.S. Chamber is proud to pay special tribute to some of its most valued constituents: America's
23 million small business owners"

McCain's Non-explanation

McCain cannot justify his 23 million claim. We asked McCain spokesman Brian Rogers for substantiation and received the statement that we reprint here. We find it simply won't do.

Rogers starts by saying that Obama's health care proposal to provide coverage for uninsured workers would amount to a "tax," either in the form of higher costs for covering employees or "cash to the government." But McCain was talking about income tax rates, not higher business costs. That's not justifying McCain's claim; that's trying to change the subject.

Furthermore – as we've just seen – the vast majority of those that McCain is counting as small-business owners have no employees and wouldn't encounter any added costs for covering workers. Obama's plan wouldn't apply to every small employer, either. It says: "Small employers that meet certain revenue thresholds will be exempt." Also, after Rogers sent his message, Obama announced July 13 that he is proposing to grant $6 billion per year in tax credits for small businesses that provide health insurance plans, covering up to half the cost of premiums paid to cover employees.

As for actual income tax rates, which is what McCain keeps talking about, Rogers says "if they make over $250,000 and file as individuals ... their taxes go up." But this leaves out all but a very small fraction of those McCain counts as small-business owners. Rogers also says taxes will go up if small-business owners "have capital gains or dividends," but Obama's proposal would not increase rates on capital gains or dividends for couples making under $250,000, or singles making under about $200,000, regardless of whether they are classified as small-business owners or not.

How Many Would Actually Pay More?

McCain is right about one thing. Many small-business owners would indeed see their taxes go up if Obama is elected and raises the top income-tax rates. According to a survey from the National Federation of Independent Businesses, about eight out of 10 small-business owners responding to the poll report that they are organized legally in a way that would require them to pay taxes on their business income as individuals, rather than as a corporation. But since Obama's plan wouldn't affect those making less than $250,000 for couples, or about $200,000 for singles, we need to estimate how many would fall into those high-income categories.

Obama's plan, according to his economic policy director Jason Furman, would return the top two federal income-tax rates to what they were before Bush lowered them. In addition, Obama would adjust the income-tax brackets to ensure that no married couple making under $250,000 or single filer making under $200,000 would pay the top rates.

The actual number of business owners who would be affected turns out to be well under a million, and the number of employers would be even less. Based on the number of taxpayers who now report any sort of business income on their returns, the Urban-Brookings Tax Policy Center projects that 663,608 taxpayers with business income, or business losses, will fall into the top two tax brackets in 2009, when any Obama tax changes would first take effect. Not all of those can properly be called "small-business owners," however. Some are farmers. Many are lawyers, accountants or other professionals who get some of their income in the form of partnership distributions. Others may be passive investors in real-estate partnerships or similar investment arrangements and not really persons who own and manage a business.

It is also not clear how many who report business income actually employ any workers. In 2004, the Tax Policy Center found that hundreds of thousands of individual taxpayers who had business income from partnerships or subchapter-S corporations (whose owners pay taxes as individuals) did not claim any tax deductions for employee expenses. For all these reasons we judge that the actual number of small-business employers who would face higher tax rates under Obama is probably far below 663,608, and certainly a far cry from McCain's ridiculously inflated 23 million figure.

Lower Taxes for Many

While Obama's plan would raise rates at the top, it also would grant what he calls a “Making Work Pay” tax credit of up to $500 per person, or $1,000 per working family. Since this credit would not begin to phase down for couples making less than $150,000, we judge it likely that many, if not most of the 23 million that McCain counts as "small-business owners" would likely get tax reductions.

An Echo of Bush

McCain's claim struck us as wildly improbable the first time we heard it because we debunked a much less expansive claim that President Bush made about John Kerry in 2004. Bush ran a TV ad saying that Kerry's proposal to raise taxes on persons making more than $200,000 a year would affect 900,000 small-business owners. We found Bush's number to be far too high. We noted that Bush was counting as a "small-business owner" anyone who reported even $1 of business or partnership income, regardless of how the taxpayer made their living. At that time, the Urban-Brookings Tax Policy Center estimated that a total of 471,000 small-business employers could be affected."

– by Brooks Jackson

Sources

John McCain 2008. "Remarks By John McCain On His Jobs For America Economic Plan," 7 July 2008.

CQ Transcripts. "McCain Addresses the League of United Latin American Citizens." washingtonpost.com, 8 July 2008.

John McCain 2008. "Remarks by John McCain at his Ohio Town Hall Meeting," 9 July 2008.

John McCain 2008. "John McCain's Weekly Radio Address," 12 July 2008.

U.S. Census Bureau. "Statistics about Business Size (including Small Business) from the U.S. Census Bureau," Web site accessed 14 July 2008.

Office of Advocacy, U.S. Small Business Administration. "Frequently Asked Questions; How many small businesses are there?" Web site accessed 14 July 2008.

Office of Advocacy, U.S. Small Business Administration. "Private Firms, Establishments, Employment, Annual Payroll and Receipts by Firm Size, 1988-2005," accessed 14 July 2008.

U.C. Census Bureau. "Nonemployer statistics: Coverage and Methodology," accessed 14 July 2008.

Claudia Parsons. "Obama proposes small business tax credits for health." Reuters, 14 July 2008.

Table T08-0164 "Distribution of Tax Units with Business Income by Statutory Marginal Tax Rate, Assuming Extension and Indexation of the 2007 AMT Patch, 2009" Urban-Brookings Tax Policy Center, 20 May 2008.

"Kerry tax plan and small business." Urban-Brookings Tax Policy Center, 14 Sept. 2004.