McCain advisor Douglas Holtz-Eakin slammed Obama's tax plan today, saying, "Obama has proposed a ‘tax cut' for 95 percent of people when, literally, almost 40 percent pay no federal income taxes at all." He cited a recent New York Post editorial labeling Obama's tax cuts "welfare."
It is true that Obama has proposed several tax credits that include families who earn too little to owe income taxes, a group that include about half of families with children. But many of these families work and pay thousands of dollars in other taxes. For example, a family of four must earn about $25,000 before owing income taxes--but they must pay payroll taxes on the first dollar they earn. Indeed, Obama's biggest refundable credit is designed to cushion the blow of payroll taxes.
Refundable credits are also often the most economically efficient way to help families, according to now-CBO director Peter Orszag. Maybe that's why McCain's own health care plan uses refundable credits.
But McCain is echoing Phil Gramm's and Newt Gingrich's old claim here that tax credits for low-income workers amount to welfare. The Wall Street Journal editorial page charmingly referred to people too poor to pay income taxes as "lucky duckies."
As a presidential candidate, George W. Bush "sandbagged" these Republicans by defending the earned income tax credit. Now McCain is standing with Gramm and Gingrich, to the right of Bush.