Posts Tagged ‘tax credit’

Spreading a Wealth of Lies

October 28, 2008

McCain, Palin, Fox News, and many others are falling over themselves to claim that Obama is “spreading the wealth,” which makes him a Marxist. But sharing the wealth is hardly an uncommon idea, even among Republican presidents and wannabes. But let’s look at some facts, and let’s start with the frequent claim from Republicans that 40% of Americans don’t even pay taxes but to whom Obama would give money.

For these Republicans, that’s taking money from us and giving it to them. But the fact is that workers don’t just pay income taxes but pay high payroll taxes, which is something all workers all have to pay, except for those earning over $100,000, which is the cap for payroll taxes. Republicans ignore these taxes, which increased for the majority of Americans under Reagan.

Obama has planned a “Make Work Pay” tax credit of $500 for 95% of American workers. While 40% of workers might not pay federal income taxes, they do pay payroll taxes. In fact, while the federal income tax has dropped for lowest quintile, payroll taxes have increased (from 5.3 in 1979 to 8.3 in 2005).

So, Obama is not giving money to people who don’t pay taxes: he’s giving a tax credit to workers who do pay federal taxes. Let’s put some numbers to this now. A worker makes $25,000 a year and pays no federal income tax because of the Earned Income Tax Credit. Still, that worker pays more than $2000 in payroll taxes. For that worker, Obama offers a $500 tax credit, but because she doesn’t have an income tax, she gets a check for $500, offsetting a portion of her payroll taxes (which she still has contributed more than $1500 after the tax credit).

This is hardly a Marxist redistribution of wealth because the worker still pays federal taxes, and the worker is getting back money she paid to the federal government. She’s getting back her money, not your money, not money she didn’t earn.

So, when Palin and her ilk lie about Obama taking “your money” and doing what he wants with it, keep in mind that not just Republicans pay taxes. Everyone does. And Obama is trying to give some of that money back to 95% of taxpayers.

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