(CNSNews.com) – Democratic presidential candidate Barack Obama’s plan to cut taxes on 95 percent of taxpayers would effectively increase government spending by an average of $64.8 billion a year and effectively raise income tax rates for many Americans, even on some earning $20-$50,000 per year, according to the non-partisan Tax Policy Center.
The heart of Obama’s tax cut proposal is in his use of refundable tax credits, which the Center describes as “credits available to eligible households even if they have no income tax liability” -- in short, refunds available even to those who don’t pay taxes. These refunds are claimed on tax returns and are paid to all taxpayers who qualify for them, regardless of whether they owe taxes or not. These refunds have the ability of reducing a taxpayer’s liability below zero, meaning they can get a refund without actually paying taxes.
In real numbers, 60.7 million people who have no tax burden at all will receive refunds from Obama, while only 33.8 million people, who pay approximately 40 percent of income taxes, will get any kind of refund. Twenty percent of taxpayers, who pay 87.5 percent of total income taxes, will actually see after-tax income decline under Obama by nearly two percent, according to the Center.
By using these refunds, Obama is able to claim that he is giving a tax cut to 95 percent of households, although only 62 percent of households pay any income taxes at all. This means that Obama’s tax plan calls for giving money to some households that do not pay taxes, including a plan to make community college “essentially free” and pay 10 percent of the interest on all mortgages.
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