Celebrate Safe Communities
Floor Speech
CELEBRATE SAFE COMMUNITIES -- (Senate - September 30, 2008)
BREAK IN TRANSCRIPT
TAXES
Mr. GRASSLEY. Mr. President, beginning in the third week of July, I have come to the floor quite often to compare the tax plans of Senator McCain and Senator Obama, our two Presidential candidates. I have talked about the relationship between party control and the likelihood of tax hikes or tax cuts. I have used the infamous thermometer chart to demonstrate. I am not going to go through all of it again because I have talked about it several times on the floor of the Senate.
But up on the top, you can see that when a Democratic President controls the White House and the Congress at the same time, you had the biggest tax increase. And then, if you come down through there, you find in various phases you have more or less tax decreases or tax increases, and you have the most tax decreases when you have a Republican President and a Republican Congress.
Now, that is over the last 28 years, approximately. In another speech I talked about the 1992 campaign promise of the middle-class tax cut. I contrasted the promised tax cut with the 1993 tax legislation that contained a world record price increase. I have used this chart that is going up there now to depict what it would look like with 16 years of tax hike amnesia and Rip Van Winkle.
In our first week back after the August recess, I returned to these topics and I discussed the effects of the proposed 17- to 33-percent increase in the top two rates. I focused on small business activity and how increased taxes hurt that small business activity and hurt the job creation machine of our great economy, which is small business.
Last week, I discussed the impact of Senator McCain's and Obama's tax plans on seniors. Earlier this week, I discussed the fiscal effects of Senator McCain and Senator Obama's plans. Today, I focus on how both tax plans would affect the middle class. The press and the candidates have focused a lot of attention on the middle class. In fact, I remember a speech of Senator Obama's alluding to something about he never heard Senator McCain in the debate last week say anything about the middle class.
Well, Senator McCain is not comfortable in the class war-type rhetoric that some people are comfortable using, and he talks about the middle class a lot when he talks about small business and working men and women. So we have heard a lot about the middle class. So I wish to concentrate on that.
My discussion today will focus on tax policy. But to get a handle on what is and is not middle-class relief, we need to see if we can define the term ``middle class.'' Today I think we need to get answers to several questions as we try to get to the bottom line of where Senators McCain and Obama are on middle-class tax relief.
The first question would be: What is the definition of ``middle class''? To get at this question, we need to see what the two candidates say about who is in the middle class and how their plan defines the middle class.
The second question would be: Where are Senators McCain and Obama on the current law of middle-class tax relief that is set to expire. I am referring to the family tax relief provisions that expire at the beginning of 2011 and the alternative minimum tax fix.
To get to that question, we need to look at where each candidate's record has been on bipartisan tax relief. We also need to look at what they plan to do with these expiring tax relief provisions, which means when the tax laws of 2001 and 2003 sunset December 31, 2010.
The third broad question is: Where would Senator McCain and Senator Obama further reduce or hike taxes on middle-class families? To get an answer to this question we will take a look at each of the candidate's new proposals for middle-class tax cuts.
If you turn to factcheck.org, you will find the definition is not simple about what is a middle class. According to factcheck.org, there is no clear definition of middle class. Here is what they say there:
Middle class means different things to different people and politicians. There is no standard definition, and, in fact, an overwhelming majority of Americans say they are middle class or upper middle class or working class in public opinion polls. Hardly anyone considers themselves lower class or upper class in America.
I ask unanimous consent to have this material printed in the Record at the conclusion of my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. GRASSLEY. I have a chart that breaks down the answers to a Pugh Research Center poll. Among other questions, the poll asks whether folks thought of themselves as upper class, upper middle class, middle class, lower middle class, and lower class. In other words, basically dividing the country into different quintiles.
According to the poll, 53 percent of Americans considered themselves middle class, 19 percent consider themselves upper middle class, and 19 percent consider themselves lower middle class. So you have this outstandingly high percentage of 92 percent of Americans who consider themselves something other than upper class or lower class.
Since we are examining Senator McCain's and Senator Obama's tax plans, it is fair to ask about their definition of middle class.
On August 16 of this year, Senator McCain appeared on Pastor Rick Warren's forum at Saddleback Church in Albuquerque, NM. Pastor Warren asked Senator McCain to draw a line, in tax relief dollar terms, between the middle class and the rich. Senator McCain's answer reflects the ambiguity of the factcheck.org definition. I quote Senator McCain:
I think the rich should be defined by a home, a good job, an education and the ability to hand our children a more prosperous and safer world than the one we inherited.
So if you're just talking about income--
Then on television there was kind of a laugh and smile at that point--
how about $5 million? No, but seriously, I don't think you can. I don't think seriously that the point is I'm trying to make, seriously, and I'm sure that comment will be distorted but the point is ..... that we want to keep people's taxes low, and increase revenues. ..... So it doesn't really matter what my definition of rich is because I don't want to raise anyone's taxes. I really don't.
How does Senator Obama define the middle class? In an interview with Fox News of Bill Hemmer, Senator Obama answered the question this way:
You know, what I would say is, if you are making more than $250,000, then you're more than middle class. You're doing better. If you are making less than $250,000, then you are definitely somewhere in the middle class. And if you're making $150,000 or less, then I would think most Americans would agree you're middle class. So that's why the fact that you are making less than $250,000, you will not see your taxes go up under an Obama administration. And you will see tax cuts with more money in your pocket, if you are making less than $150,000.
I ask unanimous consent to have printed in the Record the Bill Hemmer interview.
There being no objection, the material was ordered to be printed in the Record, as follows:
Obama Defines ``Middle Class''
(By Major Garrett)
Washington.--I wanted to throw out for consideration and debate a question I've found myself asking Democrats, Republicans, Independents and economists for years: who is in the middle class?
In the 1990s, the answers I received were almost entirely linked to income figures--the income of a family of four, or three or of a single person in his or her twenties, or an elderly person on a fixed income determined how close or how far they were from ``middle class'' status.
About the time of millennium, I began to notice that the answer to who was ``middle class'' began to change from relatively precise figures to very broad income strata. It was as if politicians--particularly at the national level--began to believe that incomes varied as widely as the core cost of living. Therefore, an income designation, for example, linked to the U.S. Census Bureau definition of median or mean income for an individual or family, would no longer work as a means of defining with precision who was or was not middle class.
In other words, individuals or families in New York, Los Angeles, Chicago, San Francisco, Boston or other high-cost urban areas could earn three times the median or mean family income and still feel strapped by month-to-month costs.
In other words, middle class status seemed over time to be less rooted in specific income figures, but regional differences in income and cost-of-living. It also seemed to reflect a sense among politicians and some economists that ``middle class'' is not just a matter of figures, but also a state of mind.
At my suggestion, my colleague Bill Hemmer was kind of enough to ask Sen. Barack Obama in London how he defined the middle class.
Here is the transcript of that exchange:
HEMMER: You mentioned the economy. You travel back to the U.S. this weekend. You're going back to a country with a limping economy, ``ailing,'' I think, is one of the words The Economist used at the end of last week.
You have suggested that taxes will be raised on some Americans. You have also suggested that taxes will be lowered for some Americans. In a limping or an ailing economy, why raise taxes on anyone?
OBAMA: Well, the--because we also have a $400 billion or so budget deficit, because we've also got to invest in infrastructure. We've got to deal with the fact that a lot more people are unemployed and are going to need unemployment benefits. We've got to shore up the housing market because people are experiencing foreclosures.
And that's why I've structured a change in the tax code where if you are making $150,000 a year or less, you're getting a tax cut, 95 percent of the American families will get a tax cut.
HEMMER: What do you consider .....
OBAMA: And the people who are going to see their income taxes raised, go up, are making more than $250,000 a year. So you and I will pay a little bit more in taxes because we can afford it. And what that allows us to do is to help the vast majority of Americans who are really hurting in this economy.
HEMMER: I know we're pushed for time. Can you give me a definition of the middle class based on income, within a range?
OBAMA: You know, what I would say is, if you are making more than $250,000, then you're more than middle class. You're doing better. If you are making less than $250,000, then you are definitely somewhere in the middle class.
And if you're making $150,000 or less, then I think most Americans would agree that you're middle class. So that's why the fact that if you are making less than $250,000, you will not see your taxes go up under an Obama administration. And you will get tax cuts and more money in your pocket if you make less $150,000.
I think that's the right way to promote the kind of bottom-up economic growth that's going to make a difference in people's lives.
Here is how the government tabulates two different types of mid-point incomes in America. The Census Bureau calculates median income (the precise mid-point between all tabulated incomes) and the mean income (the average of all the tabulated incomes) of families and individuals. The figures below are for families and individuals for 2006.
Income of family households in U.S. in 2006 (most recent year available)Median: $59,894 Mean: $77,315
(Source: Census Bureau: Income, Poverty, and Health Insurance Coverage in the United States: 2006, http://www.census.gov/prod/2007pubs/p60-233.pdf and Current Population Survey: Annual Social and Economic (ASEC) Supplement, http://pubdb3.census.gov/macro/032007/faminc/new07 X000.htm)
Income of all households in U.S. in 2006 (most recent year available)Median: $48,201 Mean: $66,570
(Source: Census Bureau: Income, Poverty, and Health Insurance Coverage in the United States: 2006, http://www.census.gov/prod/2007pubs/p60-233.pdf and Current Population Survey: Annual Social and Economic (ASEC) Supplement, http://pubdb3.census.gov/macro/032007/hhinc/new06 X000.htm)
So, the question I set before those of you who wish to discuss and debate are these: what is the middle class; are you in the middle class; have you always been there and do you ever imagine you live better than ``middle class''; and to what extent does your conception of ``middle class'' affect your view on how high taxes should be which income category.
Let the discussion and debate begin.
Mr. GRASSLEY. Senator McCain doesn't adopt a sharp line definition of middle class. Senator Obama defines middle class as everyone below $150,000. Senator Obama defines as a neutral area those earning between $150,000 and $250,000. Senator Obama defines families earning above $250,000 as upper class.
Now that we have the stated definitions of middle class, let's take a look at where Senators MCCAIN and OBAMA would change the current family tax rate. If you take a look at Senator McCain's plan, you can get a handle of where he wants to cut middle-class taxes. In effect, you can get an idea of where Senator McCain believes further middle-class tax relief ought to go. Senator McCain would lower current law levels of taxation in two widely applicable proposals. The first would double the dependent personal exemption for a family of four. This relief would apply to taxpayers with incomes up to $120,000. This new tax relief would be phased out for those families between $50,000 and $120,000. I have a chart that shows which groups of families would be affected by Senator McCain's tax proposal. It is called the regular tax, between $32,000 and $132,000, by increasing the dependent personal exemption from $3,500 to $7,000.
The other area of family tax relief that Senator McCain is targeting is relief from the alternative minimum tax. During the last couple of weeks, the House and Senate have debated AMT extension bills. Take a look at the Congressional Record and examine the debate. If you do, you will see nearly all the Democrats and most Republicans in both bodies describe the overreach of the alternative minimum tax as a middle-class family tax problem. If the AMT patch is almost universally defined as middle-class tax relief, then a fair question is: Who benefits from this fix?
I have a chart that shows this. The chart refers to a Joint Committee on Taxation analysis of the last fix that became law, meaning the 2007 alternative minimum tax fix. You can see how it affected people in different categories. You will see from the chart that the AMT patch benefited families between $40,000 and $50,000 on the low end. And as we travel across the chart, you will see the biggest category of families benefiting to be in the $75,000 to $100,000 category and the $100,000 to $200,000 category. Roughly half the families benefiting, over 9 million, earned between $100,000 and $200,00. On the higher end, we find about half a million families earning between $200,000 and $500,000 also benefited from making sure that the alternative minimum tax doesn't hit middle-income people, a group of people who could be hit if Congress didn't fix it from year to year so that they didn't get hit. This year that number is 23 million people who would get hit if the Senate hadn't passed the bill we did last week.
The AMT patch relief conforms to polling data on how Americans define themselves. The AMT patch problem that the patch remedies spreads across a broad swath of American taxpayers, as we saw from the chart.
Senator McCain's second major tax relief proposal would build upon the alternative minimum tax fix. Senator McCain would extend the alternative minimum tax fix and enlarge it, starting in the year 2013. Under Senator McCain's plan, we would start to reduce the reach of the alternative minimum tax by expanding the patch by 5 percent per year on top of the increase in exemption amount of the patch for inflation. That proposal would provide more relief to some of the 4 million families currently paying the alternative minimum tax.
If we step back and take a look, we see that Senator McCain would further reduce regular taxes for families between $32,000 and $120,000. Again, we have up the same chart. Senator McCain would extend the AMT patch and gradually enhance it, and most of the families who would benefit from the AMT patch have incomes between $50,000 on the low end and $200,000 on the high. So it looks as if Senator McCain's operational definition of middle class probably conforms to the definition that we find in public opinion polls.
Senator Obama's stated definition of the middle class, in terms of further tax relief, consists of taxpayers earning under $150,000. Let's take a look at how his plan would operate. Senator Obama used a different definition of middle class in contrasting his tax relief plan with that of Senator McCain. Here is what Senator Obama's campaign said:
According to the Tax Policy Center, the Obama plan provides three times as much tax relief for middle-class families as the McCain plan.
Behind that claim is a comparison of the Tax Policy Center analysis of Senators MCCAIN's and OBAMA's plans, proposals on families in the middle-income quintile. The middle-income quintile refers to the middle 20 percent of all families in America. According to the Tax Policy Center, that band of income runs between $37,596 and $66,354. I have a chart that depicts the band of income that would represent that middle income. We would point here to Senator Obama's tax relief down there, the light blue, between $37,000 and the $66,000 figures. As we can see, this is a much smaller group, 20 percent of the population topping out a bit above $66,000 a year income. That is far below the $150,000 and $250,000 figures Senator Obama mentioned in the Fox News interview I placed in the Record.
On the AMT patch, Senator Obama supports his words ``fiscally responsible'' AMT reform, whatever that vague concept means. Unlike Senator McCain, Senator Obama conditions extension of the AMT patch on his notion of ``fiscal responsibility.'' The Tax Policy Center assumes that this means that Senator Obama would extend the AMT patch and index it for inflation. However, this is just one think tank's interpretation of Senator Obama's statement that he supports fiscally responsible AMT reform. But for the sake of comparison, at least until 2013, the two candidates seem to be targeting the same middle-class family population. I depicted that band of middle-class tax relief on the chart, as we can see.
When we look at how both plans operate, Senator McCain's plan targets new regular family tax relief at middle-class families between $32,000 and $120,000. Senator Obama targets new regular family tax relief at middle-class families between $38,000 and $66,000. Both candidates target the same population for AMT patch extension. Senator McCain proposes additional alternative minimum tax relief by expanding the AMT patch in the year 2013 and beyond.
Let's turn to the second question. The question is, How will Senators MCCAIN and OBAMA deal with middle-class family tax relief that will expire? The bipartisan tax cuts, from 2001 and 2003, provide a very large amount of tax relief to middle-class families. So the question is, Should we allow this tax relief to expire, as it will at the end of 2010? And if Congress doesn't do anything, as you have heard me say, we will get the biggest tax increase in the history of the country without even a vote of Congress because that is what sunsets do. You go back to old law. These 2001 and 2003 bipartisan tax cuts are set to expire at the end of 2010. If these tax cuts are extended, then in 2011 a married couple making $50,000 with two children would save an average of $2,300 on their tax bill. It is clear enough. I don't have to dwell on what the chart says. If we don't do anything for this class of taxpayers, the tax bill is going to go up $2,300 per year.
Likewise, you can take any class of people, but let's look at a single mom with two kids who makes $30,000 a year. She would save an average of $1,100 off of her tax bill in 2011, if the 2001 and 2003 tax cuts are extended--the same wall only with different figures. The 2001 and 2003 bipartisan tax relief bills provide much needed tax relief, almost all of which is scheduled to expire by the end of 2010. This bipartisan tax relief doubled the child tax credit, allowed this child tax credit to be used against any AMT liability, and made a large portion of this child tax credit refundable. This bipartisan tax relief also permanently extended the adoption tax credit and increased the credit to $10,000 per child. This bipartisan tax relief also increased the dependent care credit to a maximum of $6,000. In addition, it also provided tax relief from the marriage penalty. This bipartisan tax relief also provided a number of tax relief provisions to help make education more affordable.
For example, one provision gave a deduction up to $4,000 for college tuition and related expenses. In addition, another provision increased the annual limit on contributions to education IRAs from $500 a year to $2,000 a year.
I believe it is useful to look at where the candidates have been with respect to their positions on middle-class tax relief. Senator McCain has consistently supported middle-class tax relief in his Senate career. As far as I am aware, Senator McCain has never voted to raise taxes on middle-income families. Senator McCain helped prevent tax increases on middle-income families in 2004 by voting for the Working Families Tax Relief Act of 2004. Senator McCain's budget votes have consistently provided room for the extension of the lower income tax rates as well as suspension of the harmful PEP and PEASE provisions that are now being phased out because of the 2001 tax bill. In addition, Senator McCain has been consistently a supporter of even the repeal of those two provisions.
On the other hand, Senator Obama voted for the Democratic budget and the budget conference report this year that did not provide room to protect Americans in the 25-, 28-, 33-, and 35-percent tax brackets from being hit with this tax increase that will automatically happen at the end of 2010 because of sunsets. So we get, as I said once before, the biggest tax increase in the history of the country, without a vote of Congress.
According to the IRS, single individuals falling within the 25-percent bracket in 2008 start at taxable income of more than $32,550. They earn taxable income of no more than $78,850. Singles in the 28-percent bracket will earn taxable income of more than $78,850 or less than $164,550.
Senator Obama said in the Presidential candidates' September 26, 2008, debate he would not raise taxes a dime on people making under $250,000. But his two budget votes in 2008 do not provide room for him to keep that promise. In fact, he could not even make good on that promise to those singles making over $32,550 on taxable income based on the Democratic budget he voted for.
Instead, these taxpayers with over $32,550 in taxable income would be hit with a hidden marginal tax rate increase in the PEP and PEASE categories as well as a transparent marginal tax rate increase according to the budget that Senator Obama voted for.
I turn now to the harmful alternative minimum tax, or the AMT. Both parties agree the AMT is a tax on the middle class that the middle class should never have to pay. Why it hits them--and they should never have to pay it--and why Congress takes corrective action is because it was never indexed. In addition, both parties deserve blame for the problem we have, that the AMT is not indexed. However, the Omnibus Budget Reconciliation Act of 1993, passed strictly on party-line votes by a Democratic majority and signed into law by President Clinton, did even a lot more damage to the alternative minimum tax.
In the 1993 tax bill, the exemption level was increased to $33,750 for individuals and $45,000 for joint returns, but this was accompanied by yet great increases beyond what was already in law. Importantly, as in previous bills related to the AMT, these exemption amounts were not indexed for inflation. By the way, the 1993 tax increase was passed on strictly party-line votes, with the Democrats supplying the majority.
Once again, graduated rates were introduced, except this time they were 26 percent and 28 percent. By tinkering with the rate, as well as the exemption level of the AMT, these bills were only doing what Congress has been doing on a bipartisan basis for almost 40 years, which is to undertake a wholly inadequate approach to the problem that keeps getting bigger. By ``problem'' I mean taxing middle-income people by the alternative minimum tax--a class of people whom it was never supposed to apply to.
Aside from this futile tinkering I suggested from the 1993 bill, Congress--and, of course, we have tinkered with the AMT over the years to keep it from hitting additional middle class--Congress has in other circumstances completely ignored the impact of tax legislation on taxpayers caught by the AMT. In the 1990s, a series of tax credits, such as the child tax credit and the lifetime learning credit, were adopted without any regard to the AMT. The AMT limited the use of nonrefundable credits, and that did not change.
However, Congress quickly realized the ridiculousness of this situation and waived the AMT disallowance of nonrefundable personal credits, but it only did it through the year 1998. In 1999, the issue again had to be dealt with. The Congress passed the Taxpayer Refund and Relief Act of 1999. In the Senate, only Republicans voted for the bill. That bill included a provision to finally repeal the alternative minimum tax that was on the books from 1969 to that point. Senator McCain voted in favor of this bill to repeal the AMT. However, then-President Clinton vetoed the bill. So we still continued to have the alternative minimum tax.
Later on, in 1999, an extenders bill, including a fix good through 2001, was enacted which held harmless AMT for a little while longer.
In 2001, we departed from these temporary piecemeal solutions to fix the AMT through the tax bill of 2001. That bill permanently allowed the child tax credit, the adoption tax credit, and the IRA contribution credit to be claimed against a taxpayer's AMT. While this was certainly not a complete solution, it was a step in the right direction. More importantly, the 2001 bill was a bipartisan effort to stop the further intrusion of the alternative minimum tax hitting the middle class. The package Senator Baucus and I put together effectively prevented inflation from pulling anyone else into the AMT through the year 2005.
Our friends in the House originally wanted to enact a hold harmless only through the end of 2001. But the final compromise bill signed by the President increased the AMT exemption amount through 2005. Since the 2001 tax relief bill, the Finance Committee has produced bipartisan packages to continue to increase exemption amounts to keep taxpayers ahead of inflation, including the bill of 2005. Most currently, the 2007 AMT patch was extended in late 2007. Hopefully, the House will go along with what we did last week, and we will extend that through 2008.
These packages put together since 2001 are very unique in that they are the first sustained attempt undertaken by Congress to stem the spread of the AMT through inflation, hitting the middle class who was never intended to be hit.
Now, admittedly, these were nothing but short-term fixes. But they illustrate a comprehension of the AMT inflation problem and what needs to be done to solve it.
I now look at how the candidates have voted with respect to the AMT. Senator McCain has consistently voted to protect Americans from the alternative minimum tax. Senator McCain voted for the Tax Refund and Reconciliation Act of 1999, which contained a proposal to completely phase out the AMT. In fact, in the Senate, that conference report passed on Republican votes only, including Senator McCain's. In 2001, when the AMT patch began, Senator McCain supported the Senate version of the tax relief bill that patched the AMT for a longer period of time. Moreover, Senator McCain voted for the Tax Increase Prevention and Reconciliation Act of 2005 and later bills that extended the AMT patch.
In stark contrast to Senator McCain's voting record of providing relief from the AMT, Senator Obama voted against the AMT patch contained in the Tax Increase Prevention and Reconciliation Act of 2005. Also, Senator Obama opposed Republican budgets in 2005 and 2006 that provided revenue room for the AMT patch. Senator Obama supported the 2007 Democratic budget that omitted any revenue room for such an AMT patch. In 2008, Senator Obama supported the Democratic budget that, for the first time in this election year, provided some tax relief revenue room for fixing the AMT.
Senator McCain supported the 2008 Republican budget that provided similar revenue room for the AMT.
Therefore, when looking at each candidate's voting record, the conclusion that becomes apparent is Senator McCain has been much more supportive of middle-class tax relief than Senator Obama.
I will now turn to that third and final question I posed at the beginning of my remarks: What new proposals do the candidates offer on middle-class tax relief? We are going to move from the actions of the candidates and look, instead, at their words and what we can anticipate on whoever is sworn in on January 20 next year.
Let's take a look at Senator McCain's tax plan. Senator McCain proposes to extend all of the 2001 and 2003 bipartisan tax relief. In other words, for the most part, it seems to me you can say Senator McCain does not want to increase taxes, by keeping the present tax policy basically where it has been, at least as far as not sunsetting in 2010 what we did in 2001 and 2003 and, hence, not get the biggest tax increase in the history of the country, without even a vote of Congress, because that is what happens when those tax provisions expire. Also, that is where you go back to that family of four getting a $2,300 tax increase on a married couple making $50,000. Likewise, a single mom with two kids who makes $30,000 a year would save an average of $1,100 if the 2001 and 2003 tax cuts are extended. Now, we have gone through those figures before, but they are up here on the chart so you can recall what I previously had said. But I think it is necessary to emphasize it because that is exactly what is going to happen at the end of 2010 if Congress does not step in and keep the American people, but, more importantly, the American economy, from being harmed by the biggest tax increase in the history of the country without a vote of the Congress.
In addition, Senator McCain proposes additional AMT relief by expanding the AMT patch in 2013 by indexing the patch by an additional 5 percent per year in addition to the indexing done for inflation, until the joint exemption amount is $143,000, at which time the patch would only be indexed for inflation. Therefore, those families making $143,000 and below would eventually be exempt from the AMT, and this $143,000 amount would be indexed for inflation.
Senator McCain would also double the dependent exemption from the current amount of $3,500 to $7,000. Senator McCain proposes to do this by increasing the dependent exemption by $500 each year beginning in 2010, until it reaches that $7,000 by the year 2016.
Therefore, this would provide significant additional tax savings for any married couple or single parent with one or more children. The tax relief provided by the doubling of the dependent exemption would be in addition to tax relief provided by the alternative minimum tax patch and extension of the 2001 and 2003 tax cuts.
Now, let's look at Senator Obama. He has said he is in favor of extending what he calls the Bush tax cuts, except for those Americans who make over $250,000 a year. As I have mentioned before, these should not be referred to as the ``Bush tax cuts,'' because if President Bush had gotten his way in 2001, they would have been much more than what they were. So Senator Baucus and I sat down in 2001. We were the leaders of the Finance Committee, as we are still; in his case, the chairman now, and I am ranking Republican. We worked on a bipartisan basis and did something significantly different than what President Bush wanted to do.
Regardless, Senator Obama says he would extend all of the 2001 and 2003 bipartisan tax relief for those making $250,000 or less. This includes the provision I discussed above regarding the 2001 and 2003 bipartisan tax relief, including lowering some of the marginal tax rates, providing marriage penalty relief and doubling the amount of the child tax credit to $1,000 per child.
Although Senator Obama's voting record might indicate otherwise, Senator Obama claims that he is in favor of ``fiscally responsible AMT reform.'' The Tax Policy Center assumes this means using the alternative minimum tax patch and indexing that patch for inflation to prevent more middle-class Americans from being hit by the AMT each year.
Senator Obama is proposing a new $500 tax credit called the making work pay credit that has the effect of exempting the first $8,100 of earnings from the Social Security tax. He also proposes a credit of up to $800 equal to 10 percent of the mortgage interest paid by Americans who do not itemize deductions.
Senator Obama also proposes turning the current nonrefundable saver's tax credit into a refundable credit, and the maximum credit for a married couple is $500.
Senator Obama proposes to rename the HOPE and lifetime learning credit by calling it the American opportunity tax credit. In addition, he would like to increase the maximum amount of this refundable credit from $1,800 to $4,000 and to make the credit refundable.
Finally, Senator Obama claims he wants to expand the earned-income tax credit in various ways. He also claims he wants to expand the child and dependent care credit by making it refundable.
I turn now to examine whether Senator McCain's and Senator Obama's promises regarding middle-class tax relief are realistic. Even if we assume both Senators want to enact all the tax cuts they are promising, could they deliver on these promises?
The nominally nonpartisan Tax Policy Center estimates that Senator Obama's tax plan will lose $2.9 trillion over 10 years when compared to current law. I have used this chart before in my speeches. I won't go into detail, but you can see the Obama plan is the top red line there which says how much it would lose. As I mentioned in a previous speech, this $2.9 trillion figure inaccurately assumes that Senator Obama's plan will be partially offset by $925 billion in revenue raisers. The Tax Policy Center refers to Senator Obama's $925 billion number as an ``unverifiable campaign-provided revenue estimate.'' As I mentioned in that previous speech, a more realistic estimate of revenue raisers over 10 years is approximately $220 billion, meaning Senator Obama's tax plan would actually lose another $705 billion in revenue. Therefore, the total revenue lost from Senator Obama's plan is not $2.9 trillion over 10 years but instead is approximately $3.6 trillion over 10 years.
The figure for Senator McCain's plan is higher. As my colleagues can see, the Tax Policy Center shows Senator McCain's plan to prevent widespread tax increases would lose revenue of $4.2 trillion over 10 years. In addition, as I mentioned in my prior remarks to the Senate, Senator McCain's proposal assumes revenue raisers of $365 billion. If we net that $365 billion number against the known revenue raisers number of $220 billion, we find that Senator McCain's plan is short of revenue raisers by $145 billion. Therefore, adding this $145 billion to the revenue loss of $4.2 trillion that the Tax Policy Center estimates for Senator McCain's tax relief plan results in total revenue loss of $4.3 trillion.
The National Taxpayers Union, also referred to around here as the NTU, is a nonpartisan public policy research organization. The NTU's analysis, updated September 25, 2008, says that Senator McCain's plan would include new spending of $92.4 billion per year. According to the NTU, this would result in spending increases of $924 billion over 10 years. Adding this $924 billion in estimated new spending to the revenue loss from Senator McCain's tax plan, this results in a total of $5.2 trillion of revenue loss, plus spending for Senator McCain's plan.
Now let's look at Senator Obama's tax and spending plans. Would Senator Obama's Democratic colleagues who have an obsession with pay-as-you-go on the tax side but not on the spending side, including House Blue Dog Democrats, go along with increasing the deficit approximately $3.6 trillion by Senator Obama's proposed tax cuts? This is even before taking into account the spending increases Senator Obama is proposing.
According to the nonpartisan NTU's analysis, which was updated September 25, 2008, Senator Obama has proposed to increase spending by $293 billion per year, which amounts to $2.9 trillion in additional spending over the 10-year window the Congressional Budget Office uses. Therefore, Senator Obama is proposing tax and spending programs that would increase the deficit by $6.5 trillion before even considering the cost of interest resulting from such an astronomical addition to our national debt. Therefore, Senator Obama proposes to increase the national debt by a whopping $1.3 trillion more than Senator McCain over that next 10-year period.
A portion of Senator Obama's March 13, 2006, speech regarding fiscal responsibility is posted on his campaign Web site. A portion of this speech states:
If Washington were serious about honest tax relief in this country, we would see an effort to reduce our national debt by returning to responsible fiscal policies.
Senator Obama's proposal to increase the national debt by $6.5 trillion is inconsistent with his statement regarding a return to fiscally responsible policy.
Even if he really did want to provide the tax relief he is promising, would a Democratic Congress let Senator Obama make good on most of his promises that would provide middle-class tax relief? Also, would a Democratic Congress fight attempts by Senator McCain to enact the tax relief proposals he has made?
Similar promises to those made by Senator Obama were made by candidate Clinton in 1992. Candidate Clinton said taxes wouldn't be raised on people making under $200,000 a year. However, President Clinton then raised taxes on everyone making $20,000 and over in 1993.
Perhaps Senator Obama would be able to provide some of the tax relief he has been promising but only to those Americans falling within his narrow version of the middle class, stopping at individuals making $66,000 or less, that he has been using in his campaign ads stating that he will provide three times more tax breaks than Senator McCain. Senator Obama has changed his definition of the middle class from $250,000 and below in his public statements to those making $66,000 and below in his campaign ads and on his campaign Web site. This is definitely a change, but if you make more than $66,000, I wouldn't think this is a change you would ever want to believe in. One man's change is another man's flip-flop.
Considering the history when the Democratic Party has had control of the House, the Senate, and the Presidency--and I am going to put my thermometer chart back up here--considering the history of when the Democratic Party had control of the House, the Senate, and the Presidency, are you confident that Democrats won't raise taxes on you if you make $67,000, which is above the middle class, according to one of Senator Obama's two inconsistent definitions of middle class? As history has shown us, the largest tax increases come when Democrats control the House, the Senate, and the Presidency, and you see it at the top of the thermometer there. The lowest levels of taxation happen when you have a Republican President and you have a Republican Congress. As you look at the bottom, the figures appear at the bottom of the thermometer.
We need to carefully scrutinize Senator Obama's claims that Senator McCain wouldn't provide any tax relief at all for 100 million Americans, citing the IRS statistics of income tax stats. Moreover, Senator Obama has criticized Senator McCain's tax relief plan by saying that Senator McCain's plan would not provide any direct tax cut other than increasing the dependent exemption. Even the nominally nonpartisan Tax Policy Center states that Senator McCain would provide tax cuts for all Americans, as did the 2001 and 2003 bipartisan tax relief packages.
Exhibit 1
Q: Is there a standard, accepted definition of what constitutes the ``middle class''?
Is there a standard, accepted definition of what constitutes the ``middle class''? Politicians are fond of talking about how the middle class will be affected by policies and laws, but rarely do they define who is actually part of that group.
A: No, there isn't. ``Middle class'' means different things to different people--and politicians.
There is no standard definition, and in fact, an overwhelming majority of Americans say they are ``middle class'' or ``upper-middle class'' or ``working class'' in public opinion polls. Hardly anybody considers themselves ``lower class'' or ``upper class'' in America.
It's possible to come up with a definition of what constitutes ``middle income,'' but it will depend on how large a slice of the middle one prefers. If we look at U.S. Census Bureau statistics, which divide household income into quintiles, we could say that the ``middle'' quintile, or 20 percent, might be the ``middle'' class. In 2006, the average income for households in that middle group was $48,561 and the upper limit was $60,224. But we could just as reasonably use another Census figure, median family income. In 2006, the median--or ``middle''--income for a family of four was $70,354. Half of all four-person families made more; half made less.
Journalist Chris Baker examined the ambiguous meaning of the term ``middle class'' in a 2003 Washington Times story. He, too, found no generally accepted definition, but he did get this broad one from Jared Bernstein, an economist at the liberal Economic Policy Institute: ``There are working families who can pay their bills, but they have to really think about such minimal expenditures as picking up a pizza after work, going to the movies, making a long-distance telephone call. They may have some investments, but they depend on each paycheck for their well-being.''
But others could have different definitions. Baker interviewed a man who earned about $100,000 a year and a woman who made $35,000, both of whom said they were middle class.
Public opinion polls show how slippery the term can be. An Oct. 2007 poll by the Kaiser Family Foundation, Harvard School of Public Health and National Public Radio asked 1,527 adults what income level makes a family of four middle class. About 60 percent said a family earning $50,000 or $60,000 fit that description. But 42 percent answered an income of $40,000 and 48 percent said $80,000 were both middle class.
Other polls suggest that 90 percent or more of Americans consider themselves to be ``middle class'' or ``upper-middle class'' or ``working class.'' An April 2007 poll by CBS News found that of 994 adults surveyed only 2 percent said they were ``upper class,'' and 7 percent said they were ``lower class.'' In another poll, taken by Gallup/USA Today in May 2006, 1 percent said they were ``upper class,'' and 6 percent said they were ``lower class.'' Interestingly, since 12.3 percent of Americans were living below the official federal poverty level in 2006, these poll findings suggest many who are officially poor still consider themselves to be ``middle class'' or ``working class.''
So what do politicians mean when they say ``the middle class''? Good question. Each politician may be talking about a different group of Americans, but the message many voters hear is that the politician is talking about them.
For example, Democratic presidential candidate John Edwards calls for ``tax breaks to honor and strengthen three pillars of America's middle class: savings, work, and families.'' One of his proposals is to expand a tax credit to give dollar-for-dollar matches on savings up to $500 a year. Some version of that credit would be available to families earning up to $75,000.
Republican candidate Mitt Romney, meanwhile, has proposed eliminating ``taxes on dividends, capital gains, and interest on middle class families.'' He defines ``middle class'' as anyone with an adjusted gross income of under $200,000--and acknowledges that such a proposal would affect ``over 95 percent of American families.''--Lori Robertson
SOURCES
U.S. Census Bureau. 2006 American Community Survey. Income tables, accessed 23 Jan. 2008.
NPR, the Kaiser Family Foundation, and the Harvard School of Public Health. Survey: Public Views on SCHIP Reauthorization. Survey conducted Oct. 8-13, 2007. 17 Oct. 2007.
Survey by CBS News, April 9-April 12, 2007. Retrieved 23 Jan. 2008 from the iPOLL Databank, The Roper Center for Public Opinion Research, University of Connecticut.
Survey by USA Today and Gallup Organization, May 5-May 7, 2006. Retrieved 23 Jan. 2008 from the iPOLL Databank, The Roper Center for Public Opinion Research, University of Connecticut.
Baker, Chris. ``What is middle class?; Income isn't necessarily sole measure.'' The Washington Times, 30 Nov. 2003.
Mr. GRASSLEY. I yield the floor.
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TAX TREATMENT HEALTH INSURANCE
Mr. GRASSLEY. Mr. President, I want to visit with my colleagues for a bit about the tax treatment of health insurance. Republicans and Democrats who have studied the issue agree that the current tax treatment of health insurance is inequitable. Others believe our current tax rules increase health care spending and contribute to the growing number of uninsured, to add to other negative aspects of the present tax treatment of health insurance. Congress needs to take a very hard look at the Tax Code when it takes up health care reform.
There are a number of ways to structure a proposal that would change the tax treatment of health insurance. Today, I wish to talk about the way Senator McCain structures his proposal to change the tax treatment of health insurance. The reason I want to do this is because, as the senior Republican tax writer, it is my obligation to set the record straight.
For too many weeks, I have heard inaccurate statements made about McCain's proposal for a tax credit for health insurance proposals, and I have heard them from mostly Democrats. For example, my friend, the senior Senator from Illinois and the majority whip, was on the floor of this Chamber on Thursday, September 11, saying that ``Senator McCain will tax Americans' health insurance.'' The very next day, the junior Senator from Ohio, in an exchange with the majority whip, also said that Senator McCain ``wants to tax those health care policies that tens of millions of Americans have.'' The senior Senator from Delaware has also been saying Senator McCain wants to tax people's health insurance--not here on the floor but on the campaign trail as the Democratic nominee for Vice President. He has also been saying that in television interviews. The junior Senator from Illinois consistently makes this explosive claim on the stump.
Well, using the words of my distinguished friend: Enough. Whether or not the tax credit for health insurance proposals taxes a worker's health insurance, the claims that have been made are half-baked, and this is the reason: The critics of the McCain plan fail to mention a key component of his proposal. That key component is that Senator McCain would provide every American who purchases health insurance a tax credit.
It appears that the critics overlook--or maybe they just don't understand--that the tax credit provides a bigger tax benefit to people than they would receive under the current system. So people would be better off under the McCain plan. Don't the critics want to help lower and middle income workers better afford health insurance? Don't they want to help the uninsured? Senator McCain is on the side of these Americans, while his critics are favoring the status quo.
Another false claim I have heard is that the tax credit proposal would ``deny the deduction employers can take when they pay for all or a portion of their employees' health insurance.'' Again, that is flat wrong. Even Senator Obama has said that employers will pay taxes on health insurance under the McCain plan.
In the recent Presidential debate, my friend from Illinois said:
Here's the only problem: Your employer now has to pay taxes on health care that you're getting from your employer.
I am taking the floor now to tell the junior Senator from Illinois and his Democratic colleagues, and especially the American people, that Senator Obama's description of his rival's proposal is inaccurate. Employers--and I emphasize this--will not pay taxes on the health insurance they offer to their workers.
I want to discuss how this issue is playing out in the media. Here is one instance. This past Sunday, on ABC ``This Week,'' Senator McCain was interviewed. In the interview, Senator McCain was asked about the accuracy of Senator Obama's claim that the McCain proposal for the tax credit for health insurance would ``tax health benefits for the first time by taking away the deduction that employers now get to provide health benefits.''
Here are the facts: The McCain plan does not--I repeat, does not--take away the employer deduction.
Employers will not pay taxes on health benefits. Businesses will continue to be able to deduct health care expenses as they do now, and they will continue to be able to provide health care, as they do now.
For employers, then, there will be no change. No change. Finally, and most importantly, Senator Obama's campaign has consistently stated that the McCain tax credit proposal would ``raise taxes on the middle class.''
The left-leaning think tanks, funded by the likes of George Soros and company, have been making that same claim. So again I say enough. The McCain tax credit for health care insurance proposal would not increase taxes on the middle class. To the contrary, the proposal would provide low- and middle-income workers with, get this, a tax cut. But do not take my word for it. I would like to have you listen to the Tax Policy Center, a nonpartisan think tank that has received notoriety for analyzing the tax plans of Senator McCain and Senator Obama.
The Tax Policy Center illustrates that the McCain tax credit for health insurance produces a tax cut for workers. Len Burman, director of the Tax Policy Center, said, ``It is mostly a tax break,'' when he was interviewed by CBS News on September 15.
I ask unanimous consent to have the CBS News report printed in the Record.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See Exhibit 1.)
Mr. GRASSLEY. The bottom line, the McCain tax credit for health insurance would not affect the employers' business deduction nor would employers pay taxes on health insurance. The proposal would not raise taxes on the middle class, rather it would provide a tax cut for the middle class.
Finally, while the proposal taxes workers' health insurance, Senator McCain is providing the same workers with a tax credit, which is a bigger tax benefit than low- and middle-income workers receive under our current system.
I am going to slow down. Let me explain how health insurance is currently taxed. And the reason is because it is vitally important that my Senate colleagues and my friends in the media understand the current rules governing the taxation of health insurance. To be clear, there are very distinct tax rules that apply to, one, an individual purchasing their health insurance; two, an employer paying for all or a portion of its employees' health insurance; and, three, workers purchasing insurance through their employer.
Unfortunately, most people mix up these three different kinds of tax rules. For example, far too often I have heard people get the employee exclusion, which I will explain in a moment, confused with the employer business deduction. So I have a chart that lays it out. Employee exception and employer business deduction is not equal. Employee exclusion is for the worker; employer business deduction is for the employer.
The employee exclusion is there. Well, a worker purchasing health care through his or her employer does not pay income or payroll taxes on the cost of the health insurance policy.
In other words, the amount of health insurance coverage that is paid for by the employer is excludable from income. This means that the cost of the employer-provided health insurance is not taxable for income or payroll tax purposes.
In addition, the amount of the health insurance coverage that is paid for by the individual worker on their own behalf through a salary reduction arrangement reduces the worker's taxable income. This means that a worker has less income on which to pay income and payroll taxes.
As the chart says, the employee's exclusion is the tax benefit provided to the worker. Let's drill down on the employee exclusion for a moment. I want to explain how this tax benefit works.
Tax 101 teaches us that the tax benefit that you get from a tax exclusion, just like a tax deduction, is based on the tax bracket you are in. This means if you are in a high tax bracket, you receive a bigger tax benefit than someone in a lower tax bracket. So it is very regressive.
Here is a chart that illustrates how regressive the current employee exclusion of the cost of employer-provided health insurance really is.
So we have a new chart. Take a look at it. Here we assume that the average cost of a family's health insurance policy would be about $12,000. After all, the coverage that Members of Congress get costs around $12,000. So this ought to be a good number to use. As you can see, a worker in the 10-percent tax bracket would receive 1,200 dollars' worth of benefits. Compare this with a tax benefit that an upper income worker receives, and you find out it is $4,200 a year, a great amount of inequity.
We have to ask ourselves, is it fair that low- and middle-income workers receive a smaller tax benefit for health insurance than upper income workers receive?
Now, what is the employer business deduction? Here an employer paying for all or a portion of its employees' health insurance can deduct the amounts they pay as ordinary and necessary business expenses, no different than the employer can deduct wages. In essence, the Tax Code treats employer contributions for health benefits as compensation. This is consistent with how economists view employer contributions for health benefits. It is as simple as that.
It is important to note that the employer business deduction is a tax benefit provided to the employer. So we put the original chart back up. I did not want to leave out another very important tax benefit for health insurance, or should I say, the lack of a tax benefit. I am speaking about the fact that people who purchase their own health insurance generally do not receive a tax benefit under our current laws.
They could if they were self-employed, but I am talking about people not self-employed or not otherwise employed or employed where they do not have health insurance, and you want to buy it on your own. In this case, the individual purchases his or her own insurance with aftertax dollars out of their own pocket. These individuals are able to deduct medical expenses that exceed 7.5 percent of their adjusted gross income, but only if the individual itemizes their return. And exceeding the 7.5 percent of gross income to get an income tax deduction for health care and health insurance is not very common. That is why only about 6 percent of all tax returns claim the deduction above that 7.5 percent.
Let's now turn to how changing the current tax rules in the same manner, as contemplated by Senator McCain, would affect people and would affect employers. I want to explain to my friends who are critics, and I have told you who those Senators are, and my friends in the media, how the McCain tax credit for health insurance would actually work.
We can quickly cross the impact any changes would have on employers off the list right away. The reason: As I have said two or three times, employers will not be affected, contrary to what several Senators have said criticizing the health insurance plan of Senator McCain. Everyone needs to understand this key fact because the critics keep getting it wrong.
In other words, let me say for a fourth or fifth time: Employers will not be affected by how the McCain tax plan works.
Let's talk about individuals purchasing their own health insurance. As I mentioned, under the current tax laws, these people generally do not get a tax benefit. The McCain tax credit for health insurance proposal would give these people a meaningful tax benefit and do it for the very first time. The tax credit could be used by the individual to reduce the cost of their health insurance. In this case, the individual would not be required to spend as much of their own hard-earned money on health insurance as they do under the current system.
If the tax credit exceeds the pricetag of the individual's health insurance policy, the excess may be used for other health care expenses. You could use it like for copays or deductibles.
Now we get to the most important part. I am going to explain how workers will be affected by the McCain tax credit for health insurance. I would like all of my colleagues, whether you are Republican or Democrat, and particularly my friends in the media, to pay close attention because the senior Senator from Arizona has structured his tax credit for health insurance in a very unique way.
Let's get back to the basic. As I stated, health insurance that a worker purchases through his or her employer is not taxable to the worker. Again, this is referred to as the employee exclusion. The exclusion, however, has two parts. So we will look at a new chart.
No. 1, the worker does not pay income taxes on the cost of coverage; and, two, the worker does not pay payroll taxes on the cost of coverage. Very clear on the chart. The proposal advanced by my friend from Arizona would maintain the payroll tax exclusion. So let me repeat. The cost of health insurance a worker gets through their employer would not be taxed for payroll tax purposes. This goes for the employer as well.
That is why I have emphasized that the employers do not pay any taxes under the McCain plan. With regard to income taxes, Senator McCain converts the current income tax exclusion into a tax credit. Let me say it another way. The McCain tax credit for health insurance proposals does not eliminate the income tax exclusion. Instead, the income tax exclusion is converted to a tax credit.
So here, let's go back to tax 101. As I discussed earlier, tax 101 teaches us that a tax exclusion, just like a tax deduction, is tied to your tax bracket. A tax credit, on the other hand, is not tied to your tax bracket. Rather, the tax credit reduces your tax liability dollar for dollar. This means that, by definition, a tax credit is more valuable to a lower-income taxpayer. So if you were to convert the income tax exclusion into a tax credit, you would effectively be increasing the tax benefits for low-income workers.
Depending on the dollar amount of the tax credit, this would also be true for middle-income workers as well. So this is what I am saying: I am saying the McCain tax credit for health insurance is effectively increasing the tax benefit for low- and middle-income workers. I am saying the McCain tax credit makes the tax treatment of health insurance more equitable because every worker is receiving the same tax benefit.
How can some of my friends on the other side oppose making the current tax treatment of health insurance more equitable? Do my friends not want to help out low- and middle-income workers? Let me show my colleagues and my friends in the media how the McCain tax credit for health insurance produces a tax cut.
Under the proposal, the health insurance a worker purchases through his or her employer would be taxed like compensation for income tax purposes. But, unlike compensation paid in the form of taxes, the proposal would not subject the cost of employer-provided health insurance to payroll taxes, as I have discussed. This means that amount of taxes a worker would be required to pay on the cost of their health insurance would only depend on the worker's income tax bracket.
Under the proposal, the worker would apply the tax credit against the new income tax liability that is generated from taxing the worker's health insurance.
In other words, the tax credit would offset any new income tax liability. As illustrated in this chart, because the new income tax liability would be less than the tax credit, the worker would actually receive a tax cut.
So let's take a closer look at the chart. We have several different brackets. Let's assume a family of four purchases a family health insurance policy of $12,000 through its employer. Under the proposal, this family would pay income taxes on a $12,000 policy. Let's assume this family would be in the 25-percent tax bracket. This family would pay $3,000 in additional income taxes. This new tax liability would be offset by a $5,000 tax credit for family health insurance. As a result, $2,000 would be left over. This means the family would receive a $2,000 tax cut. This is a tax cut that would be greater if a family purchased even less expensive coverage.
As we can see, the tax credit for health insurance produces a tax cut for all workers. The tax cut is progressive because workers in the 10-percent bracket are receiving almost five times the tax cuts for the workers in the 35-percent tax bracket.
You can see again, by looking at the chart, that a worker in the 10-percent tax bracket would receive a $3,800 tax cut, compared to the tax cut for an upper income worker in the 35-percent tax bracket of $800.
Like most campaign-related proposals, there are a number of questions of how the idea will impact people in the long run. As the senior Republican tax writer, I will ask these questions. If I determine that Congress needs to tweak the proposal here or there to improve it, I will recommend that we do so. But only time will tell whether we have to undertake such an exercise.
I hope my friends on the other side and those in the media have heard me. I hope they work on getting it right because it is clear, No. 1, that the McCain tax credit for health insurance produces a tax cut for workers; two, that the McCain tax credit for health insurance provides a tax benefit to people purchasing their own insurance and doing this for the very first time; and, three, that the proposal does not adversely impact employers in any way, shape, or form.
Exhibit 1
[From CBSNews.com]
The Truth About McCain and Insurance Taxes
Washington, September 15, 2008.--It's one of the most explosive and important political charges of the election: ``He wants to tax your health benefits,'' Barack Obama said.
Obama's charge was that that John McCain wants to tax the health insurance benefits. Americans buy through employers, CBS News correspondent Wyatt Andrews reports.
``That's a $3.6 trillion tax potentially increase on middle class families,'' Obama said. ``That will eventually leave tens of millions of you paying higher taxes.''
John McCain wants a multi-trillion dollar tax on the middle class? Here are the facts.
Obama has the tax part correct, but the impact on the middle class is exaggerated--most people will see tax cuts.
McCain has proposed to end one of the largest tax breaks in the entire economy. Some 60 million Americans buy health insurance thru employers tax-free, and McCain would indeed begin to tax the value of the benefit.
However McCain also proposes to give the money back as a tax credit, $2,500 for individuals, $5,000 for families. ``Let's give them a $5,000 refundable tax credit to go out and get the health insurance of their choice,'' McCain said. ``It's mostly a tax break,'' said Len Burman of the Tax Policy Center.
The non-partisan Tax Policy Center says except for the very richest Americans, most people buying insurance will see a tax cut.
``Families at all income levels would pay lower taxes, at least on average,'' said Burman. ``On average, is about a $1,200 tax cut in 2009.''
On the issue of energy, meanwhile Gov Palin touts her energy expertise based on Alaska's production.
``My job has been to oversee nearly 20 percent of the U.S. domestic supply of oil and gas,'' she said.
Here are the facts: According to the Energy Department, Palin's numbers are high.
Alaska provides 14.3 percent of America's crude oil, and only 2.6 percent of its natural gas. You can check out the Energy Information Administration statistics here.
On the health care debate, the Obama campaign tells CBS News that one day, the middle class will be hit by a McCain tax increase--but the experts CBS News consulted said that day is 10 years away.
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Source