The American: The Folly of Obama’s Tax Plan, by Alex Brill (American Enterprise Institute) & Alan D. Viard (American Enterprise Institute):
Senator Obama’s proposed ‘tax cuts for the middle class’ are actually marginal rate hikes in disguise.
Senator Barack Obama declared recently that he wants to “reform our tax code so that it rewards work and not just wealth.” We think that is a great goal if it means a simple tax system with low marginal tax rates. Unfortunately, a close inspection of Obama’s proposals reveals something disquieting: he would raise marginal tax rates for many middle-income taxpayers, a bad move for anyone seeking to promote economic growth. …
The solid line in the nearby chart illustrates the effective marginal tax rate under Obama’s tax proposals (based on the authoritative Preliminary Analysis of the 2008 Presidential Candidates’ Tax Plans, published by the Brookings Institution/Urban Institute’s Tax Policy Center). These are the marginal rates in 2009 for a two-earner couple with two children—a college freshman and a 12-year-old receiving after-school care—under some specific assumptions. For comparison, the dotted line on the chart illustrates the effective tax rates under current law. The rates shown in the chart are not spelled out in the tax code; they are the result of giving and taking away tax breaks as the household’s income changes.
(Hat Tip: Greg Mankiw (Harvard).)
Update:
- Angry Bear: Attacking Obama’s Tax PlanWith basic Dishonesty
- Economists for Obama: Obama’s Tax Plan and Basic Honesty
- Marginal Revolution: The Obama Tax Plan, by Tyler Cowen
