Surprise! GOP's "Pledge To America" Misleads On Taxes
Today the House Republicans released their midterm election manifesto, dubbed the "Pledge to America." In the Pledge, Republicans claim that in the time since President Obama took office, he and Congressional Democrats have "enacted $680 billion in gross tax increases." However, many of the tax increases the Republicans cite eliminate corporate tax loopholes. Additionally, Republicans ignore the fact that under President Obama federal taxes are at their lowest levels in 60 years and that Obama and Congressional Democrats have cut taxes for 95% of working families.
"Pledge To America": Obama And Democrats "Have Enacted $680 Billion In Gross Tax Increases"
House Republicans' "Pledge To America":
"Since January 2009, President Obama and Congressional Democrats have enacted $680 billion in gross tax increases, $316 billion of which are tax hikes that hurt the middle class families President Obama said would not see a tax increase."
Many Of The So-Called "Tax Increases" Eliminate Corporate Loopholes
The claim that Congress has enacted "more than $670 billion" in tax increases comes from an April report issued by Rep. Dave Camp. Among the "tax increases" cited by Camp are the elimination of "the deduction for expenses allocable to Medicare Part D Subsidy," eliminating a tax credit for paper producers who use "black liquor," and the repeal of "guidance allowing certain taxpayers to claim losses of an acquired corporation."
Health Care Law Eliminated Corporate Tax Advantage "That Amount[ed] To Double-Dipping." According to an editorial in the New York Times, "What is really going on? It is true that, starting in 2013, the new law eliminates a corporate tax advantage on retiree drug benefits that amounts to double-dipping. It is also true that accounting rules require that the present value of the entire additional tax that companies will have to pay over the next several decades be put on the books now. That led AT&T to declare a charge of about $1 billion in the first quarter of 2010 and Verizon to declare $970 million. Those look like staggering amounts until one understands that they don't require any immediate cash payments and that the added taxes will be paid out slowly - over perhaps 30, 40 or more years, depending on a company's retiree plan. Wall Street certainly gave a collective yawn. Stock prices for the companies that made announcements barely budged (some went up), and analysts urged investors not to overreact because the accounting change would have a negligible impact on these companies' valuation, or market capitalization." [New York Times, 4/5/10, emphasis added]
Tax Credit For "Black Liquor" Eliminated By Health Care Law Identified As "An Absolute Government Boondoggle." According to Bloomberg:
Paper companies may claim about $6.6 billion from a U.S. tax break meant to discourage use of fossil fuels, and they'll burn more diesel to get it.
The tax credit is an incentive to mix an alternative energy source with carbon-based fuel. Papermakers already generate electricity by burning a wood byproduct from pulp-making called "black liquor." To qualify for the windfall they are adding diesel fuel to the black liquor, following the letter of the law while violating its spirit, said Verle Sutton, editor of the Reel Time Report, a unit of Los Angeles-based Forestweb Inc., a provider of data on the paper industry.
"It's an absolute government boondoggle," Sutton said. "These companies were not using fossil fuels. They only started because they needed it for the tax credit to work. So there's a negative to the environment, not a positive." [Bloomberg, 4/17/09]
Recovery Act Repealed Change To Tax Code That Gave "American Banks A Windfall Of As Much As $140 Billion." According to a Washington Post report on the Bush-era change in tax code:
The financial world was fixated on Capitol Hill as Congress battled over the Bush administration's request for a $700 billion bailout of the banking industry. In the midst of this late-September drama, the Treasury Department issued a five-sentence notice that attracted almost no public attention.
But corporate tax lawyers quickly realized the enormous implications of the document: Administration officials had just given American banks a windfall of as much as $140 billion.
The sweeping change to two decades of tax policy escaped the notice of lawmakers for several days, as they remained consumed with the controversial bailout bill. When they found out, some legislators were furious. Some congressional staff members have privately concluded that the notice was illegal. [Washington Post, 11/10/08]
Since Taking Office, President Obama & Congressional Democrats Have "Cut Taxes Across The Board For Working Families"
The Recovery Act Cut Taxes For 95% Of Working Families. According to PolitiFact.com:
Under the stimulus bill, single workers got $400, and working couples got $800. The Internal Revenue Service issued new guidelines to reduce withholdings for income tax, so many workers saw a small increase in their checks in April 2009.
The tax cut was part of Obama's campaign promises. During the campaign, Obama said he wanted $500 for each worker and $1,000 for working couples. Since the final number was a bit less than he promised, we rated his promise a Compromise on our Obameter, where we rate Obama's campaign promises for fulfillment.
During the campaign, the independent Tax Policy Center researched how Obama's tax proposals would affect workers. It concluded 94.3 percent of workers would receive a tax cut under Obama's plan based on the tax credit to offset payroll taxes. According to the analysis, the people who wouldn't get a tax cut are those who make more than $250,000 for couples or $200,000 for a single person. [PolitiFact.com, 1/27/10]
CBS News: "One Third Of The Recovery Act Was Made Up Of Tax Credits." According to CBS News:
One third of the Recovery Act was made up of tax credits, the White House emphasizes.
"No one I've met is looking for a handout," Mr. Obama said in his address Saturday. "And that's not what these tax cuts are. Instead, they're targeted relief to help middle class families weather the storm, to jumpstart our economy, and to bring the fundamentals of the American Dream -- making an honest living, earning an education, owning a home, and raising a family -- back within reach for millions of Americans."
The credits included:
- An increase in the Earned Income Tax Credit
- An expansion of the Child Tax Credit
- For those who work, the Making Work Pay tax credit offered $400 per individual and $800 per couple
- For those who lost their job, there was a 65 percent tax credit to help cover the cost of health care. The first $2,400 in unemployment benefits went tax-free
- Up to $2,500 under the American Opportunity Credit for students and parents paying for college tuition
- $8,000 for first-time home buyers
- A deduction of state and local taxes paid on a new car
- Up to $1,500 for home improvements to increase energy efficiency
Even conservative advocacy group Americans for Tax Reform, which advocates for a single, national flat tax rate, found some praise for the Recovery Act -- specifically for provisions allowing small businesses to write off a wider range of business expenses. [CBS News, 4/15/10]
Federal Tax Rates Are At Lowest Levels In 60 Years
Federal Taxes Are At Their Lowest Level In 60 Years. According to the Brookings Institution's William Gale: "It is ironic if not bizarre that the TEA party got going during a time when federal taxes were at their LOWEST in about 60 years. So, I am not seeing that people are taxed too much right now. I think the message that government should not take its power to tax lightly is always appropriate. But I don't see any sort of recognition in the TEA party statements that if we don't want to raise taxes we will need to cut spending by enormous amounts and where they are willing to cut spending." [Brookings Institution, 4/14/10]
PolitiFact: Top Income Tax Rate Is Lower Under President Obama Than Under Presidents Reagan, Eisenhower. According to the non-partisan PolitiFact.com:
Today, the top income tax rate is 35 percent, starting at $186,825 for individuals and $373,650 for couples.
By contrast, during the eight years of the Eisenhower presidency, the top rate averaged roughly 90 percent, typically hitting individuals making $200,000 a year or couples making $400,000 a year. In 2010 dollars, that's equivalent to $1.6 million for an individual and $3.2 million for a couple. Someone making the 1954 equivalent of $186,825 in today's money would have paid a tax rate of 59 percent back then.
So by this measure, Obama's comparison with Eisenhower earns a True.
Now for Ronald Reagan.
In 1981, Reagan's first year, the top tax rate was 70 percent, hitting individuals earning $107,100 and couples earning $215,400. The top rate dropped immediately to 50 percent in 1982 and stayed there through 1986. In 1987, the top rate fell again to 38.5 percent, and in 1988, it fell to 28 percent, kicking in at $113,300 for married individuals and $149,250 for married couples. (The 1988 incomes would be equivalent to $209,000 and $275,000 today.)
So, for one year of the Reagan presidency, the top rate was lower than it is now under Obama. For the other seven years, it was higher.
For the Reagan comparison, we rate Obama's statement Mostly True. [PolitiFact.com, 9/20/10]