TAX PLAN OR WELFARE PLAN?

[HT:OP]
Barack Obama's tax plan is the opposite of supply-side economics. He proposes to raise marginal rates for just about every federal tax. He also proposes a raft of tax credits that taxpayers can receive if they engage in various government-specified activities. Moreover, the tax credits would mostly go to those who pay little or nothing in federal income taxes. His trick is to make the tax credits "refundable," says Ferrara. For example:

• If the tax credit is for $1,000, but the taxpayer would otherwise only pay $200 in taxes, the government would write a check to the taxpayer for $800.
• If the taxpayer pays nothing in federal income taxes, the government would pay him the whole $1,000.

Such credits are not tax cuts. Indeed, they should be called The New Tax Welfare. In effect, Obama is proposing to create or expand a slew of government spending programs that are disguised as tax credits. The spending on these programs is then subtracted from the total tax burden, in order to make the claim that his tax plan is a net tax cut overall.

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