Reactions to Obama's Tax Plan • TaxProf Blog

Following up on this morning’s post on the Wall Street Journal op-ed, The Obama Tax Plan, by Obama advisors Jason Furman & Austan Goolsbee:

The Obama campaign has released this detailed tax plan, along with this summary, key facts, and comparison with the McCain tax plan. The tax plan has attracted a lot of attention in the media and blogosphere:

U.S. News & World Report: With Polls Close, Obama Blinks on Taxes, by James Pethokoukis:

This is a pretty big change for Obamanomics.

It will increase capital gains and dividend tax rates, to 20%, only for families making over $250,000. Before, Obama was hinting at rates as high as 28% for everyone.

On the issue of the Social Security income cap, he’s now considering a plan that would make folks earning over $250,000 pay in the range of 2% to 4% more in total (combined employer and employee) payroll taxes. Previously, there were hints at increases of from 6% to 12%.

My thoughts on this:

It’s smart politics. Previously, McCain could say the Obama plan would raise taxes on everyone who had an investment. Now the tax issue is more purely one of class warfare, where McCain has to defend not raising taxes on wealthier Americans despite a projected budget deficit of almost $500 billion. It’s tougher to make the claim that Obama would raise taxes more than he is telling.

It’s dumb politics because it opens Obama to the flip-flopper charge—he is only changing his plan because the polls are close and the issue was hurting him.

McCain will have to do a better job in telling folks why cutting corporate taxes is a direct benefit for workers and highlight the risk of raising taxes in a weak economy.

Goolsbee and Furman also trot out the "return-to-Clintonomics" line of defense …

McCain might want to consider tax relief that directly targets families, such as a massive increase in the child tax credit. I have raised this issue in chats with McCain advisers, but they haven’t seemed too interested in going beyond what McCain’s already proposed, doubling the dependent exemption.

The New York Sun (editorial): Obama’s War on Women:

[T]he most astonishing sentence in the op-ed is this one: "His plan would not raise any taxes on couples making less than $250,000 a year, nor on any single person with income under $200,000." It amounts to a declaration of war on two-income families, a marriage penalty of punitive proportions. If those two single persons with income just under $200,000 get married, Mr. Obama is going to hammer them with a huge tax increase. If the second earner, who in many cases is the woman, is going to have to give 54% of what she earns to the government, she might as well stay home with the children. Mr. Obama may be able to get away with symbolic slights to women, such as not picking Senator Clinton as vice president. But punishing them with confiscatory taxes for participating in the workforce at a high income level moves the slight into the realm of substance.