ObamaNomics: New Labels for Worn Out Ideas

Barack Obama promises “tax cuts” …. for 95% of America.

Imagine the reaction from voters if Senator Obama’s stood on the campaign stage and bellowed:

“Twenty-three Million families are getting cash grants from the government, averaging $2,400, and up to $4,700.  This is not enough and if I’m elected President I promise to give each of them $1,000 more, at the expense of other taxpayers.”

Mr. Obama would certainly not be ahead in the polls with a proposal like that!  But, with the active collaboration of the compliant media Barack Obama has been able to get away with this exact promise by branding it a “tax cut.”

President Carter invented the Earned Income Credit (EIC) in 1977. In the convoluted language of Washington D.C., the EIC is a “refundable tax credit.”  This means that rather than apply to the welfare system for a cash grant, individuals or families file a tax return and automatically receive the full amount of the “tax credit,” even if it exceeds their tax obligation, even if their tax obligation is $0.

The table to the left tracks the growth in the cost of the EIC. After adjusting for inflation the increase has been more than 1,000%.

According to IRS data a third of all individuals and families earn enough to file a tax return have no income tax obligation.    Of those who pay $0, half qualify for, and receive an average of $2,400 from, the EIC.

When Senator Obama speaks of “tax cuts,” he does not mean a reduction in the tax rates, currently from 10% to 35%.  Instead, he will create several new “refundable tax credits” like the EIC.

The first new “refundable tax credit” on the Senator’s list is called “making work pay” and will amount to $1,000 per family.  Each of the 23 million families now receiving EIC cash grants averaging $2,400 will receive an additional $1,000.