President Obama last night at his State of the Union speech touted that his administration cut taxes for Americans. This statement took a number of individuals by surprise, including myself, because Mr. Obama only provided a fraction of the story about what actually happened to our tax money.:
“That’s why we extended or increased unemployment benefits for more than 18 million Americans; made health insurance 65 percent cheaper for families who get their coverage through COBRA; and passed 25 different tax cuts.
Now, let me repeat: We cut taxes. We cut taxes for 95 percent of working families. (Applause.) We cut taxes for small businesses. We cut taxes for first-time homebuyers. We cut taxes for parents trying to care for their children. We cut taxes for 8 million Americans paying for college. (Applause.)
I thought I’d get some applause on that one. (Laughter and applause.)
As a result, millions of Americans had more to spend on gas and food and other necessities, all of which helped businesses keep more workers. And we haven’t raised income taxes by a single dime on a single person. Not a single dime.” (Applause.)
Americans for Tax Reform was just as taken aback by this statement as I was, so they sent out a bullet-point list of facts and myths on the tax issues surrounding Mr. Obama. Here are a couple of those points. (h/t Ryan Ellis at ATR):
MYTH: “We cut taxes for 95 percent of working families…we haven’t raised income taxes by a single dime on a single person. Not a single dime.”
FACT: It’s mathematically impossible to cut taxes for 95 percent of working families. According to the IRS, fully one-third of all tax returns owed no income tax last year. Nearly 20 percent of returns had neither an income nor a payroll tax liability. These people cannot see their taxes cut any further. Anything given to them is pure spending.
Obama, Pelosi, and Reid may not have raised income taxes last year, but they surely tried to. Last year’s administration budget submission had dozens of tax hikes. The health care legislation they are still pushing has 18 separate tax hikes. All told, ATR has calculated that President Obama proposed or supported $2.1 trillion in tax hikes in 2009. And let’s not forget that he signed into law a $65 billion tax hike on cigarette smokers 16 days into his administration. The median income of a smoker is $36,000.
MYTH: “To help working families, we will extend our middle-class tax cuts. But at a time of record deficits, we will not continue tax cuts for oil companies, investment fund managers, and those making over $250,000 a year. We just can’t afford it.”
FACT: Let’s lay out exactly what tax increases he is proposing here (leaving aside the fact that “we” are the ones who can’t afford his taxes, not the other way around):
The top two tax rates (which two-thirds of small business profits face) would rise from 33 and 35 percent today to 36 and 39.6 percent in 2010. The return of the itemized deduction and personal exemption phase-outs would take the mathematical effective top marginal tax rate to 41.6 percent.
The top capital gains rate would rise from 15 to 20 percent. The top dividends rate would skyrocket from 15 to 39.6 percent. This would be a body blow to everyone’s IRA and 401(k) as the stock market priced in this new tax wedge.
Obama-Pelosi-Reid wants to raise the capital gains tax rate for managers of investment partnerships from 15 percent to 39.6 percent. This will leave universities, charities, and pension plans holding the bag as partnership managers understandably demand a greater profit share to make them whole after-tax.
Finally, Obama is referring to repealing the “Section 199” domestic production activities deduction—but only for energy companies. This is a targeted tax hike on one industry. It will result in higher energy costs for all of us (companies don’t pay higher taxes—they pass them along to us as higher prices). It’s shortsighted and counter-productive.
So, yes, my question on my SOTU live blog at 9:20 PM on January 27, 2010 remains.:
Obama:’We cut taxes.’ Is he serious?