The Wonk Room

Huckabee Joins Chambliss To Stump For The Fair Tax»

During his unsuccessful campaign for the Republican presidential nomination, former Arkansas Governor Mike Huckabee was a vocal supporter of the fair tax, a plan which would abolish the Internal Revenue Service and replace the federal income tax and most other federal taxes with a 30 percent sales tax.

According to the Atlanta Journal-Constitution, Huckabee was in Georgia last weekend to support Sen. Saxby Chambliss (R-GA), another fair tax advocate, who is headed into a December 2nd run-off election with challenger Jim Martin. Huckabee “joined about 2,000 people Sunday afternoon at the Gwinnett Civic Center in what became not just a fair-tax rally, but a major campaign stop”:

“This race is our best chance to keep the fires burning for the fair tax,” said Huckabee. “And we are not going to squander this opportunity.”

However, as Matthew Yglesias has documented, even conservatives think that the fair tax is a crazy idea. In The New Republic, Jonathan Chait explained why the plan is unworkable:

Tax experts believe that a sales tax above around 10 percent is impossible to enforce because the incentives for cheating are so great. The fair tax would impose a 30 percent sales tax–so high that it would no doubt begin a cycle of black-market sales, resulting in escalating rates to capture the lost revenue, resulting in even more cheating, to the point of total collapse.

Even if the system was sustainable, as Megan McArdle pointed out “It will end up being quite regressive, with the highest effective burden falling on the lower tiers of the middle class.”

The American tax code is, admittedly, a mess, and one that actively encourages income disparity. However, enacting a cockamamie scheme that entirely scraps the current system would just make matters worse. Instead — as explained in Change for America — the U.S. needs to find its way back to a more progressive tax code that helps build “a sustainable, inclusive economy that benefits all.”

IRS: Loopholes Let Corporations Pay 25% Tax Rate, Not 35%»

John McCain and other conservatives spent the last year railing against the United States’ 35 percent corporate tax rate.

What they never mentioned is that this 35 percent corporate rate is so riddled with loopholes and shelters that the United States collects less in corporate taxes as a percentage of GDP than most other industrialized countries.

Now, new IRS data shows typical American companies paid only 25.3 percent of their U.S. book income in federal corporate taxes in 2005, despite a statutory corporate tax rate of 35 percent, by using loopholes and shelters.

U.S. companies “reported about $1.35 trillion in pretax U.S. book income to their investors in 2005, but about $1.03 trillion to the IRS — a difference of about 23%.”

A quick back of the envelope calculation shows that the difference between paying 35 percent on $1.03 trillion in income and $1.35 trillion in income is approximately $112 billion — enough to finance more than half of CAP’s ambitious “Green Recovery” plan to jumpstart a clean energy economy.

Some differences between book and reported income are legal and legitimate, but they can also be a sign of sheltering and abuse. Effective tax reform would first broaden the tax base by closing loopholes and eliminating shelters, before considering a lower statutory corporate rate.

Reynolds’ Rant»

Our guest bloggers are Robert Gordon and James Kvaal, senior fellows at the Center for American Progress Action Fund.

In this weekend’s Wall Street Journal, Alan Reynolds accuses us of being lawyers, not economists. We are guilty as charged. But the rest of Reynolds’ rant is wrong.

Reynolds disputes our organization’s estimate that John McCain’s tax plan is worth $3.8 billion to the five largest American oil companies. He claims that we excluded the oil companies’ deductions and credits from our analysis. But we did include deductions. And though we excluded credits — because they are not publicly available — they would have only increased the size of our estimate.

Our estimate is conservative in other ways as well. It used 2007 profits, even though oil companies are breaking all the records this year. It did not count McCain’s big expansion in deductions for business investment. And it did not include oil companies’ foreign profits.

We analyzed 200 companies last spring, and our results have been featured in millions of dollars worth of advertising. None of these companies have disputed our results. In fact, no one did until Reynolds wrote his column three days before the election.

Reynolds gets the big things wrong as well. There is little reason to think corporate taxes put American businesses at a competitive disadvantage. Corporate tax collections are among the lowest in the world because our code is riddled with special interest deductions, credits and exemptions that shield corporate profits from tax. While corporate tax reform is overdue, John McCain’s plan would drive up the deficit, shift the tax burden onto middle-class wages, and harm the economy.

WATCH: McCain Dances With The Far-Right And The Super-Rich On Economic Policy»

When it comes to taxes and the economy, John McCain has got his dancing shoes on.

In the early 2000s, John McCain eschewed his reputation as a radical tax cutter by opposing the Bush tax cuts because they “came at the expense of middle class Americans.”

But now he’s waltzed all the way back to the far right, proposing not only to extend the Bush tax cuts, but double them by giving away another $300 billion in budget-busting tax breaks for corporations and the wealthy while leaving out 100 million Americans.

In the last month, he’s made overtures to the middle class, promising mortgage relief and a new set of tax cuts for the middle class. But when the details were revealed, they turned out to be just more giveaways to corporations and the wealthy.

Watch him go:

Dancing shoes? Maybe he’ll just add taps to his $520 loafers.

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UPDATE: Embeddable code after the jump.

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McCaskill Straightens Out The McCain Campaign On Corporate Taxes»

On the stump, Gov. Sarah Palin (R-AK) has been emphasizing Sen. John McCain’s (R-AZ) plan to cut the corporate tax rate from 35 percent to 25 percent, citing the oft-repeated claim that the U.S. rate is the “second highest in the world.”

However, yesterday on CNBC, Sen. Claire McCaskill (D-MO) was asked if the “second highest” rate needs to be cut, and responded with the true story: the U.S. tax code is riddled with loopholes that enable corporations to pay far less. Watch it:

McCaskill is quite right to say that corporations benefit from the intricacies of the tax code, as it contains myriad “loopholes, shelters, and giveaways that minimize, or completely eliminate corporate taxes.” This week, in fact, the Center on Budget and Policy Priorities released a report showing that “the U.S. corporate tax burden is smaller than average for developed countries” due in part to the “plethora of generous corporate tax breaks“:

Corporations in 19 of the member states of the Organization for Economic Co-operation and Development paid 16.1 percent of their profits in taxes between 2000 and 2005, on average, while corporations in the United States paid 13.4 percent.

The CBPP noted that the “second highest” charge “while true…gives the false impression that the corporate tax burden is greater here than in other developed countries.”

This all makes perfect sense, since the U.S. also collects below the OECD average in corporate tax revenue. The Treasury Department actually estimates that “various corporate tax breaks will cost the federal government more than $1.2 trillion over the next ten years.”

Instead of worrying about the amount of taxes that corporations are paying, perhaps Palin should focus on the 100 million middle class households to which the McCain/Palin economic plan gives no benefit.

Media Amplify The McCain Campaign’s ‘Socialism’ Charge»

On the stump recently, both Sen. John McCain (R-AZ) and Gov. Sarah Palin (R-AK) have been calling Sen. Barack Obama’s (D-IL) economic plans “socialism” because he wants to “spread the wealth” by raising rates on the top two federal income tax brackets back to the level at which they were under President Clinton.

The Tax Policy Center noted that “sharing the wealth, as McCain puts it, is what government does.” But this hasn’t stopped the media from amplifying the McCain message by questioning if Obama’s plan amounts to socialism or even Marxism.

The most egregious example was put forth by WFTV Orlando’s Barbara West, who asked Sen, Joe Biden (D-DE) “how is Sen. Obama not being a Marxist if he intends to spread the wealth around?” But the media haven’t stopped there. Watch a compilation:

As the New Yorker pointed out yesterday, “the principle that Obama evinced, which most economists would regard as unexceptionable, can be traced to Adam Smith.” In The Wealth of Nations, Smith wrote:

It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.

Furthermore, a new analysis by Citizens for Tax Justice found that only 2.5 percent of Americans would lose any of their Bush tax cuts under the Obama plan.

Not only should those in the media point out that McCain’s charge is false, but they should note that McCain also plans to redistribute wealth. He just wants to redistribute wealth to the already wealthy.

Currently, the United States’ income concentration is at its highest level since 1928. McCain, though, has embraced the Bush economic agenda, proposing to make all of the Bush tax cuts permanent. From this, the bottom 60 percent of taxpayers would only see 12 percent of the benefit. Meanwhile, the top 0.1 percent of taxpayers would see a $1 million tax cut under McCain’s plan.

As Ben Armbruster noted on ThinkProgress, “Seeing that McCain’s policies have little to offer the average American, it seems he is now forced to acquiesce to the fringe right wing talking point that Obama just might be a Marxist.” But this doesn’t mean that the media need to follow suit.

Boehner Proposes Tax Cuts For Corporations and Millionaires To Save The Economy, Again»

Today, Rep. John Boehner (R-OH) is “preparing to unveil a major economic initiative” aimed at “economic recovery.” Based off of an earlier “alternative” to Rep. Nancy Pelosi’s stimulus package - and outlined in a memo circulated last weekend - Boehner’s plan includes tax cuts for coprorations and zeroing out the capital gains tax.

Ultimately, the plan is a mere conglomeration of ideas plucked from the conservative tax cut wishlist and won’t do what Boehner intends:

- If we cut taxes on small businesses, they’ll use the money to create jobs.

As the Wonk Room has previously noted, tax cuts do not spur business investment. Private business investment actually rose after President Clinton’s tax increases and fell after both the Reagan and Bush tax cuts. As Princeton professor Uwe E. Reinhardt wrote “I would challenge supply-siders to explain why the owners of small businesses — say, restaurants — would expand the capacity of their establishments or build new restaurants at a time when customers stay home, even if they were given a tax cut on the income from their restaurants.”

- A zero capital gains tax is the fastest way to rebuild Americans’ 401(k)s.

The benefits from a capital gains tax cut go overwhelmingly to millionaires, particularly given the current economic climate, in which “the middle class doesn’t collect capital gains, or dividends, in any material amount.” As Michael Ettlinger pointed out “benefits of capital gains tax cuts overwhelmingly go to those who own capital assets outside of retirement.” Furthermore, Ettlinger noted “a 0% capital gains rate would in fact be a disaster for the market.” “Given the uncertain times we face, it’s far more likely that a zero rate on capital gains would prompt a massive exodus from the market than a massive entry into it,” he wrote.

Boehner is also proposing a reduction in the corporate tax rate from 35 percent to 25 percent. As the Wonk Room has noted over and over, this proposal does not create jobs. A study by the Center for American Progress Action Fund found that increased corporate profits do not trickle down, and that corporations invest little in new commercial structures such as factories and office buildings.

As evidence that his plan will be well received, Boehner cites a New Models/Winston Group survey showing that “the American people overwhelmingly believe the focus of government economic policy should be economic growth and jobs, not income redistribution or ’spreading the wealth around.’” However, according to the latest Pew Research poll, “only 25 percent of the public agrees with the centerpiece of the conservative tax program: making all of the Bush tax cuts permanent.”

Instead of presenting a bailout stimulus package economic recovery plan based on trickle-down tax cuts - much in the manner of Sen. James Inhofe (R-OK) - Boehner should take a serious look at stimulus thru infrastructure investment, an idea which is gathering widespread support and could actually help the economy recover.

Contrary To McCain’s Assertions, Tax Cuts Do Not Spur Business Growth»

Recently, Sen. John McCain (R-AZ) has been criticizing Sen. Barack Obama (D-IL) for his plan to let the Bush tax cuts expire on the top two federal income brackets. McCain claims that this will hurt small businesses, and cause them to cut jobs:

[H]is tax increase would impact 50 percent of small business income in this country, and the jobs of 16 million middle class Americans who work for those small businesses. My opponent’s massive new tax increase is exactly the wrong approach in an economic slowdown.

McCain’s economic plan centers on making the Bush tax cuts permanent and cutting corporate taxes. However, as Princeton professor Uwe E. Reinhardt points out in the New York Times, business investment actually rose following President Clinton’s tax increases and fell following the Reagan and Bush tax cuts.

According to the Center on Budget and Policy Priorities, “only 1.9 percent of filers with any small-business income are projected to face either of the top two income tax rates in 2009,” and thus the effects of Obama’s tax increases on small businesses would be almost negligible. Furthermore, as Reinhardt pointed out, even rich business owners won’t expand their businesses if no one has money to spend:

Specifically, I would challenge supply-siders to explain why the owners of small businesses — say, restaurants — would expand the capacity of their establishments or build new restaurants at a time when customers stay home, even if they were given a tax cut on the income from their restaurants.

Echoing a slew of prominent economists - including Nobel Prize winner Paul Krugman - Reinhardt advocates domestic stimulus “to rebuild the nation’s tattered infrastructure.” Indeed, this is the path that should be taken, instead of cutting taxes for the rich and America’s corporations.

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Lieberman’s ‘Misreading’ Of ‘The American Story’»

Today, during an interview on Fox News, Sen. Joe Lieberman (I-CT) said that while he has at times “voted to raise taxes on the wealthiest Americans,” he currently agrees with the tax plan of Sen. John McCain (R-AZ) and opposes higher tax rates for the wealthy.

He explained that by proposing a more progressive tax system, Sen. Barack Obama (D-IL) is “misreading” the situation of middle-class workers like “Joe the Plumber.” Lieberman claimed that, with the two presidential tax plans, “the American story” is “on the line.” Watch it:

However, it is Lieberman who is “misreading” this entire situation. First, as Lieberman concedes, Joe the Plumber is “not a rich guy,” and thus would receive a larger tax cut under Obama’s tax plan than under McCain’s.

And since Lieberman is so concerned with Americans who are “trying to make [their] way up” and “want to be rich,” it is worth pointing out that income inequality threatens economic mobility. America’s income concentration is at its highest level since 1928, and “36 percent of children born to parents in the bottom wealth quintile remain in the bottom as adults.” Meanwhile, just “7 percent of children born to parents in the bottom wealth quintile make it to the top quintile in adulthood.”

The American public actually “rejects the conservative approach to taxes” and favors a more progressive system:

Data from the latest Pew Research poll shows that only 25 percent of the public agrees with the centerpiece of the conservative tax program: making all of the Bush tax cuts permanent. In contrast, 62 percent want to either repeal tax cuts for the wealthy while keeping the rest of the cuts (37 percent) or repeal all of the tax cuts (25 percent).

If Lieberman wants “the American story” to come true for middle- and low-income workers, he should be supporting a progressive tax system.

Holtz-Eakin: It’s A ‘Fair Point’ That McCain Cuts Taxes For The Wealthy, But ‘I’m Not Here To Quibble’»

Douglas Holtz-Eakin, an economic adviser to Sen. John McCain (R-AZ), has repeatedly asserted that there are “no tax cuts anywhere for the wealthy” in McCain’s tax plan. During a debate on Bloomberg last night, Holtz-Eakin again said that “there aren’t any tax cuts for the wealthy in this.”

However, when it was pointed out that McCain’s proposal to temporarily cut the capital gains tax would overwhelmingly benefit millionaires, Holtz-Eakin conceded that was a “fair point,” but said he’s “not here to quibble on things like that.” Watch it:

Indeed, this is a very fair point, as the Tax Policy Center found that two-thirds of the benefits from McCain’s capital gains cut would go to those making $1 million or more. Were this proposal enacted, millionaires would get an average tax cut of more than $72,000, while those making less than $50,000 would receive, on average, no cut at all.

However, Holtz-Eakin now needs to acknowledge that the rest of McCain’s plan also significantly cuts taxes for the wealthy. McCain’s tax plan delivers almost half of its benefits to the top 1 percent of taxpayers, and gives the top 0.1 percent a $1 million tax cut. Meanwhile, 100 million middle class households receive no benefit at all.

So it is “fair” to say that McCain’s capital gains cut would only benefit the wealthy, but it’s also “fair” to say that about the rest of McCain’s plan.

UPDATED REPORT: McCain’s Tax Plan Would Have Saved The McCains $730,000»

An updated analysis of the Obama and McCain tax plans by the Center for American Progress Action Fund finds that John and Cindy McCain would have saved $730,000 over 2006 and 2007 under McCain’s tax plan.

Under Obama’s proposed plan, the McCains would have saved $62,000 over the same two years.

Read the full analysis here.

Barack and Michelle Obama would have saved $270,000 under McCain’s plan and $14,000 under Obama’s.

This analysis incorporates the effects of John McCain’s new controversial proposal to temporarily cut the capital gains tax to 7.5% from 15%, a cut whose benefits go overwhelmingly to those making over $600,000/year, as well as other recent modifications to the McCain and Obama proposals.

John McCain’s $300 billion tax plan is heavily skewed towards corporations and the wealthy and does nothing for over 100 million Americans.

It sure wouldn’t do nothing for John and Cindy McCain, though.

Better Job Growth Under ‘Tax and Spend Liberals’»

John McCain has been attacking Barack Obama as a “tax-and-spend liberal” for his plan to roll back the Bush tax cuts for people making over $250,000 in order to pay for middle class tax cuts and investments in alternative energy, health care, and education.

McCain, for his part, has proposed doubling the Bush tax cuts by adding an additional $300 billion in budget busting tax breaks for corporations and the wealthy.

Both these approaches have been tried, and only one created real job growth and widespread prosperity.

Under President Bush, whose economic agenda consisted almost entirely of massive tax cuts heavily skewed to the wealthy, job growth was sluggish, creating only 4.8 million jobs over the course of his entire presidency.

By contrast, in the first months of his administration, President Clinton proposed a budget that raised income tax rates slightly on the very rich and “new ‘investment’ spending for education, job training, social services, health, science and technology and community and regional development.” The resulting budget lay the groundwork for a balanced budget and stunning economic growth that created 23 million jobs over the course of his presidency.

At the time, the Washington Post reported that conservatives “blasted [the Clinton plan] as more of their old ‘tax and spend’ policies.”

McCain’s Plan To ‘Redistribute The Wealth’ To The Already Wealthy»

Recently, Sen. John McCain (R-AZ) has been criticizing Sen. Barack Obama (D-IL) for his belief “in redistributing wealth.” “I’m not going to redistribute your wealth,” claims McCain.

However, McCain is absolutely going to redistribute wealth. He is just going to redistribute it to the already wealthy. By doubling down on the Bush tax cuts and proposing $175 billion in tax cuts for corporations, McCain’s policies will exacerbate the already astounding income inequality in the United States.

Today, the Organization for Economic Cooperation and Development (OECD) released a report showing that “the United States has the highest inequality and poverty in the OECD after Mexico and Turkey, and the gap has increased rapidly since 2000.” The report notes that “in the United States, the richest 10 percent earn an average of US$93,000 — the highest level in the OECD. The poorest 10 percent earn an average of US$5,800 — about 20 percent lower than the OECD average.”

An analysis by the Center for American Progress Action Fund shows that President Bush’s economic policies “redistributed wealth to the richest Americans and left the majority with stagnating wages and declining household incomes.” As Scott Lilly noted today:

Based on data prepared by the Internal Revenue Service from tax returns filed during the post-9/11 recovery (2002 to 2006), household income grew by $863 billion during the period. The 15,000 families at the top of the income scale saw their annual incomes go from about $15 million a year to nearly $30 million. They alone accounted for more than 25 percent of all of the growth in income for the entire country. The remaining 1.7 million families in the top 1 percent of households accounted for nearly another 50 percent.

Currently, the United States’ income concentration is at its highest level since 1928. Meanwhile, McCain has embraced the Bush economic agenda, proposing making the Bush tax cuts permanent, a move from which the bottom 60 percent of taxpayers would only see 12 percent of the benefit. McCain’s tax plan gives no benefit to over 100 million middle class households, but does give $175 billion in tax breaks to America’s corporations.

But income inequality is cause for even more concern than the simple numbers suggest, since it also has an effect on mobility. McCain said today that “in this country, we believe in spreading opportunity.” It should give him pause, then, to note that just “7 percent of children born to parents in the bottom wealth quintile make it to the top quintile in adulthood,” and “36 percent of children born to parents in the bottom wealth quintile remain in the bottom as adults.”

OECD Secretary General Angel Gurria said that “greater income inequality stifles upward mobility between generations, making it harder for talented and hard-working people to get the rewards they deserve.”

As Matthew Yglesias wrote today:

It’s neither possible nor desirable to have complete equality of income, wealth, or opportunity. But at the same time, it’s impossible to prevent large inequalities in income and wealth from creating the kind of large inequalities in opportunity that most people, including people like McCain who are committed to making the distribution of wealth and income as unequal as possible, find undesirable.

Inhofe Proposes Tax Cuts For The Wealthy To ‘Get Our Economy Back On Track’»

Today, Sen. James Inhofe (R-OK) visited the Tahlequah Daily Press in order to outline a new “six-point economic plan,” which he claims will “get our economy back on track.” Remarkably, Inhofe managed to pack into one economic outline multiple ways in which to cut taxes for the wealthy, while proposing little to aid the rest of Americans. Here is how Inhofe hopes to save the economy:

- Make the 2001 and 2003 tax cuts permanent.

The Center on Budget and Policy Priorities (CBPP) notes that permanently extending all of the Bush tax cuts would cost $3.8 trillion over ten years. 22 percent of the benefits from this would go to those making over $1 million, and 31 percent go to the top 1 percent of households. Meanwhile, the bottom 60 percent of taxpayers would see 12 percent of the benefit.

- Incentivize savings by relaxing limits on IRA contributions.

There are tax advantages to investing through an IRA because contributions “are tax-deductible, and accumulations within the accounts occur on a tax-free basis,” so investment strategists note that “it is normally best to try and make the maximum annual contribution.” But the CBPP has noted that “only about 5 percent of those eligible for IRAs contribute the maximum amount,” and raising limits on contributions would “swell deficits” while “doing little or nothing to assist low- and moderate-income households to save more for retirement.”

- Promote investment by eliminating the capital gains rate and repatriate foreign earnings.

As the Wonk Room noted when Sen. John McCain (R-AZ) proposed a temporary cut in the capital gains tax, the benefits from such a cut go overwhelmingly to millionaires. As the Tax Policy Center pointed out, “75% of the benefit of low taxes on capital gains and dividends already go to those making $600,000 or more. Half goes to those making $2.8 million or more.”

With this outline, Inhofe is proposing some of the same fixes for the economy that conservatives put forth when debating both the $700 billion economic bailout bill (before and after it initially failed to pass the House) and the economic stimulus package. For conservatives, it seems, there’s nothing that a tax cut for the rich won’t fix.

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The McCains Would Receive $55,000 A Year In Tax Breaks From McCain’s Capital Gains Proposal»

Our guest blogger is Michael Ettlinger, Vice President for Economic Policy at the Center for American Progress Action Fund.

On Friday, the McCain campaign released Cindy McCain’s 2007 tax returns. Sadly for the McCains, Mrs. McCain shows over $1.8 million dollars less tax return income in 2007 than 2006. Of course, she still reported over $4 million of income ($4,197,028) which — when added to the Senator’s tax return income in 2007 ($405,409) — brought their total to over $4.5 million ($4,602,437 to be precise).

A large source of income for the McCains came in the form of capital gains. This is an example of how, though many people have capital gains income sporadically throughout their lives, the wealthy have them quite consistently and they constitute an important source of income. In 2006, the McCains reported a total of $743,476 in capital gains. In 2007 they reported $746,395.

Last week, as part of his new Pension and Family Security Plan, Sen. McCain proposed temporarily cutting the capital gains tax from 15 percent to 7.5 percent. The proposal — had it been in effect in these years — would have reduced the McCains’ taxes by $55,761 in 2006 and $55,980 in 2007 (a two-year total of $111,740).

This is on top of the more than $350,000 that they would have saved in 2006 due to McCain’s other tax proposals.

One other note: the campaign refuses to release anything but Mrs. McCain’s 1040 tax form, which provides only a fraction of the information that she is reporting to the IRS. Most of the McCains’ decline in income between 2007 and 2006 was in “Schedule E” income. Schedule E is a form where income from a wide variety of sources is reported - including trusts and a type of closely held (often family owned) business.

There is a great deal of income legally sheltered from taxation in the machinations underlying the schedule E. Without having Mrs. McCain’s complete records, it’s impossible to know for sure whether the McCains actually did better or worse in 2007 than in 2006 - their accountants may just have had more ways to legally shelter income.

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Holtz-Eakin: ‘You Can’t Cut Taxes For 95%’ Of People, But McCain Cuts Taxes For ‘Everybody’»

During an interview on CNBC today, Douglas Holtz-Eakin, an economic adviser to Sen. John McCain (R-AZ), asserted that “you can’t cut taxes for 95 percent of the American people, if just under 50 percent aren’t paying taxes.” However, minutes later, he claimed that McCain would cut taxes for “everybody.” Watch it:

By Holtz-Eakin’s own standard, a cut for “everybody” should be impossible. But by claiming 50 percent of Americans “aren’t paying taxes,” Holtz-Eakin is simply furthering the McCain campaign’s false story of low-income Americans not paying taxes.

While the bottom one-third of Americans do not pay federal income taxes, as Brian Levine noted earlier “they do pay federal payroll and excise taxes, as well as state and local taxes.” Simply having no federal income tax liability does not give someone a tax-free existence.

Furthermore, McCain does not cut taxes for “everybody.” In fact, over 100 million middle class households do not benefit from his tax plan. Meanwhile, this weekend McCain unveiled a new tax proposal - temporarily cutting the capital gains tax from 15 percent to 7.5 percent - that gives two-thirds of its benefit to millionaires and gives “on average, nothing” to people making less than $50,000 a year.

Holtz-Eakin’s two statements only make sense if he thinks “everybody” actually means “the wealthiest Americans.”

The McCain Campaign’s New Target: ‘Lucky Duckies’»

Our guest blogger is Brian Levine, a Senior Policy Adviser at the Center for American Progress Action Fund.

The McCain campaign held a conference call today to attack the idea of providing tax credits to Americans that don’t pay any federal income tax. During the call, McCain economic adviser Douglas Holtz-Eakin said that providing these tax credits is simply “sending checks to individuals, many of whom may not even be working, and certainly have no tax liability.”

These low-income Americans, once preposterously referred to as “lucky duckies” by the Wall Street Journal, have long been a favorite target of the far-right. In the 1990s, Newt Gingrich called providing tax credits to Americans with no income-tax liability “welfare.” The McCain campaign has apparently decided to reprise this disingenuous attack.

The federal income tax isn’t the only tax that Americans pay. While the poor may not pay income taxes, they do pay federal payroll and excise taxes, as well as state and local taxes. The majority of Americans actually pay more payroll taxes than federal income taxes. Low-income Americans must pay payroll taxes on every dollar they earn. And payroll taxes are regressive – the highest earning twenty percent of Americans pay a lower average rate than the lowest earning twenty percent.

Refundable tax credits aren’t “welfare” – they are smart policy. According to a recent Urban Institute analysis, refundable tax credits “provide a much more even and widespread motivation for socially valued behavior” than other forms of tax incentives. John McCain apparently used to agree – his own health care plan includes refundable credits. But the McCain campaign won’t let consistency get in the way of bashing an easy target – in this case, “lucky duckies.”

Two-Thirds Of The Benefits From McCain’s New Tax Cut Go To Millionaires»

As part of his new economic outline - The Pension and Family Security Plan - Sen. John McCain (R-AZ) has proposed cutting the tax rate on long term capital gains and dividends to 7.5 percent in 2009 and 2010. The current tax rate for these capital gains is 15 percent.

Today, the non-partisan Tax Policy Center (TPC) released an analysis showing who would benefit from this cut. Like the rest of McCain’s tax cuts, this one overwhelmingly aids the wealthy, with two-thirds of the benefit going to those making over $1 million:

In 2009, under a plan that lowers taxes on both gains and dividends, those making $1 million or more would get two-thirds of the benefit, and an average tax cut of more than $72,000. Those making less than $50,000 would get, on average, nothing.

As the TPC pointed out, “75% of the benefit of low taxes on capital gains and dividends already go to those making $600,000 or more. Half goes to those making $2.8 million or more.”

In fact, as the Wonk Room noted when McCain first toyed with including this provision in his economic plan, under the current 15 percent rate, 93.9 percent of the benefits go to the top 5 percent of taxpayers, and 84.8 percent to the top 1 percent. The other 80 percent of taxpayers see only 1.7 percent of the benefits of today’s rate.

The McCain campaign claims that the cut will “strengthen incentives to save, invest, and restore the liquidity of markets.” But given the current economic situation - one in which “people do not have an awful lot of capital gains” - this measure will do nothing to stimulate the economy.

Furthermore, The Street noted that McCain’s cut “might have unintended consequences,” like encouraging investors “to make one-time sales to capture lower capital gains and increased tax write-offs,” which “would facilitate capital flight.”

Cross-posted at Think Progress.

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McCain’s Measures ‘Aimed Directly At The Middle Class’ Go Directly To The Wealthy»

The Politico reported last night that Sen. John McCain (R-AZ) is planning to unveil “new economic plans” this week, “aimed directly at the middle class.”

Campaign officials said that “among the measures being considered are tax cuts – perhaps temporary – for capital gains and dividends.”

But if these are indeed the proposals that McCain makes, then he will, once again, have to explain why his economic plan is geared disproportionally towards the wealthy, as cutting capital gains and dividends taxes does nothing for the middle class.

As the Wonk Room has previously noted, most capital gains flow to millionaires. Families making more than $1 million collect 59% of capital gains, while families making less than $50,000 collect 2.5%.

Furthermore, as the Tax Policy Center has shown, under the current capital gains and dividends rate, 98.3% of the benefits go to the top 20% of taxpayers. The other 80% of taxpayers see only 1.7% of the benefits of today’s rate. 93.9% of the benefits go to the top 5%, and 84.8% to the 1%.

Brad DeLong spotted the problems with McCain’s proposals, saying that “the middle class doesn’t collect capital gains, or dividends, in any material amount. Indeed, that’s what makes you middle class–that even though you have a fair or a good income you work for it.”

McCain has already made it abundantly clear that he plans to craft his economic proposals around aiding the wealthy, corporations, and bankers who made bad loans. In that light, these new proposals would actually fit in rather well.

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Palin’s Policies That Are ‘Great For The Middle Class’: Cutting Corporate Taxes and Earmarks»

Yesterday, during an interview with NBC’s affiliate in Tampa Bay, Gov. Sarah Palin (R-AK) was asked which economic policies she and Sen. John McCain (R-AZ) support that would be “great for the middle class.” The policies that Palin cited included a corporate tax cut and earmark reform, neither of which do much of anything for the middle class. Watch it:

To her credit, Palin answered this question better than McCain campaign surrogate Carly Fiorina, who was only able to come up with “drill, drill, drill” when asked about McCain’s middle class tax cut. Still, Palin put forth one policy that benefits corporations and another that has nothing to do with middle class taxpayers at all.

As the Wonk Room has noted time and again, the McCain/Palin proposal to cut the corporate tax rate from 35% to 25% gives $175 billion to America’s corporations, while not creating any jobs, which is the campaign’s justification for the cut. Palin also repeated the campaign’s false claim that the U.S. corporate tax rate is the “second-highest in the world.”

As for earmark reform, it’s hard to see how cutting earmarks benefits the middle class. Accordng to USA Today, “eliminating every congressional earmark in the federal budget would save an estimated $18 billion a year.” And as Matthew Yglesias noted, “normally an earmark will be for something popular that you’re proud to claim credit for,” such as food banks, schools, and medical centers.

Palin is using earmarks and corporate tax cuts to distract from the fact that the McCain/Palin economic plan includes nothing for the middle class. 100 million middle class households receive no benefit from McCain’s tax plan, and some middle-class households could actually see a tax increase if McCain’s health care plan is enacted. In the end, the McCain/Palin economic vision is not “great” for the middle class at all.

$1.4 Billion In McCain Tax Cuts For ‘Mainstream Media’»

Conservatives continue to cry “liberal media bias” to explain away the unpopularity of the right-wing agenda, despite the stark economic realities for all but the super-wealthy in America. These tired claims ignore the reality that the right-wing agenda actually benefits the “mainstream media.”

The multinational corporations that run the mainstream media — GE (NBC), Time Warner (CNN), Walt Disney (ABC), News Corporation (FOX), and Viacom (CBS) — stand to benefit hugely under a McCain presidency. The centerpiece of Sen. McCain’s economic plan — actually, the whole plan — is large tax cuts for corporations. It would deliver $1.44 billion in tax cuts to the five largest media companies, according to an analysis by the Center for American Progress Action Fund.

These giveaways are just one part of McCain’s doubling of the Bush tax cuts for corporations and the wealthy which would create the largest deficits in 25 years and drive the United States into the deepest deficits since World War II. McCain and Palin have promised that the $700 billion bailout would not threaten these tax cuts.

The Palin/McCain Job Plan Cuts Corporate Taxes And Doesn’t Create Jobs»

During the Vice-Presidential debate last night, Gov. Sarah Palin (R-AK) spent ample time claiming that Sen. John McCain’s (R-AZ) economic plan will create new jobs and cause the economy to grow:

PALIN: We can speak in agreement here that darn right we need tax relief for Americans so that jobs can be created here…We do need the private sector to be able to keep more of what we earn and produce. […]

You’re going to have a choice in just a few weeks here on either supporting a ticket that wants to create jobs and bolster our economy and win the war or you’re going to be supporting a ticket that wants to increase taxes, which ultimately kills jobs, and is going to hurt our economy.

The McCain/Palin economic plan consists of a cut in the corporate tax rate, a permanent research and development tax credit, and a provision allowing full expensing of business equipment, which they claim “focuses on how to help our economy create more good jobs.”

This plan, however, spends hundreds of billions of dollars, while not even creating enough jobs to keep up with the number of new workers entering the workforce.

In an analysis for the Center for American Progress Action Fund, Brian Levine finds that McCain’s plan “would create only about ƒƒ450,000 jobs in 2009, at a cost of $280 bill