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Sorting out the truth on taxes

Obama's tax plan hits $200,000 and up

The statement

Barack Obama plans "a tax increase for everyone earning more than $42,000 a year."

John McCain, Aug. 11 in an Internet ad The ruling

The McCain campaign's evidence for its charges are Obama's votes on budget resolutions. A kind of blueprint for the federal budget, a budget resolution sets targets for committees that write legislation on taxes and spending. Obama joined Democrats on what were largely party-line votes expressing the desire to roll back the Bush tax cuts in order to fund popular programs. The resolution envisions tax cuts rescinded on people making about $42,000 and higher. But voting for a budget resolution is quite different from voting for a tax increase. Budget resolutions are nonbinding, don't have the force of law and don't include precise details on taxes or spending. They're different from legislation that raises or lowers tax rates. The McCain ad seems designed to make the average viewer think Obama wants to raise taxes on people making $42,000 and higher, which isn't true. Obama wants to increase taxes by rolling back the Bush tax cuts on people making more than $200,000 if single or $250,000 if married filing jointly. What the ad implies is a major distortion that seems intent on confusing people about what Obama's policies are. We rate McCain's claim False. Breaks for all companies; credit for kids

The statement

John McCain offers "billions in tax breaks for oil and drug companies, but almost nothing for families like yours."

Barack Obama, Aug. 11 in a television ad The ruling

Under McCain's proposed tax plan, it is true that oil and drug companies would get reduced taxes, but this is because McCain advocates lowering the overall corporate tax rate, from 35 percent to 25 percent. He's not doling out special breaks for particular industries. This part of the ad is a significant distortion of McCain's plan. The ad also says that McCain offers "almost nothing for families like yours." This isn't entirely accurate either. McCain proposes increasing the tax exemption for dependents from $3,500 to $7,000. Obama, on the other hand, proposes several tax cuts aimed at the middle and lower incomes: a $500 tax credit for workers to offset payroll taxes, mortgage interest deductions for people who don't itemize their returns, expansion of the earned-income tax credit, and eliminating taxes for seniors who make less than $50,000. The statement that McCain offers "almost nothing for families like yours," though, depends on what your family is like. McCain does propose increasing the exemption for dependents. Some families will consider that a significant tax savings while others might rate it "almost nothing." Putting the statements together, we rate this Barely True.

McCain supports the Bush tax cuts

The issue

On the Bush tax cuts.

John McCain The ruling

McCain was one of the few Republicans who opposed tax cuts proposed by President Bush in 2001, and he opposed them again when they came up for renewal in 2003. In 2001, McCain voted against a $1.35-trillion tax cut package, arguing that the tax cuts didn't do enough for the middle class, and because of a need for increased defense spending. Two years later, McCain again cited fiscal prudence for opposing $350-billion in additional tax cuts, specifically citing the unknown costs of the war in Iraq. "No one can be expected to make an informed decision about fiscal policy at this time," McCain said. When the tax cuts came up for renewal again in 2006, though, he voted in favor of them. McCain said he supported the tax-cut extensions, which also reduced tax rates on capital gains and dividend income, because "American businesses and investors need a stable and predictable tax policy to continue contributing to the growth of our economy. These considerations lead me to the conclusion that we should not reverse course by letting higher tax rates take effect." This is an actual change of position for McCain, so we rate it a Full Flop.

Worker credit cuts middle-class taxes

The statement

Barack Obama's tax plan cuts taxes "for 95 percent of all working families."

Barack Obama, Wednesday in Elko, Nev. The ruling

The linchpin here is Obama's tax credit for workers, which is intended to offset payroll taxes. Single people can qualify for a $500 credit; married couples could get $1,000. Obama wants to roll back the Bush tax cuts for people who make $200,000 or more for singles and $250,000 or more for married couples. Those people would get the credit, too, under Obama's proposal, but it would be wiped out by their higher tax rates. Most people, though, don't make more than $200,000. In fact, according to Internal Revenue Service statistics, about 97 percent of all filers made less than that. Now, Obama said his tax plan would reduce taxes for 95 percent of working families. We consulted the nonpartisan Tax Policy Center, which created detailed models for how candidates' tax proposals would affect taxpayers. Under Obama's plan, the center finds: 95 percent of all tax filers would get a cut in their individual income taxes; and 95 percent of all families with children would get a cut in their total federal taxes. Every taxpayer has different circumstances, but if you make less than $200,000 a year and you work, we can't see how your taxes would go up under Obama's plan. We rate this statement True.

Key points of their platforms

The Bush tax cuts are set to expire during the next president's term, and each candidate has a different way of addressing that, along with other tax proposals.

John McCain

• Keep the Bush tax cuts in place for all income levels.

• Expand the tax exemption for dependents (often children), eventually doubling it to $7,000 per dependent.

• Reduce the maximum corporate tax rates by 10 points, from 35 percent to 25 percent.

Barack Obama

• Roll back the Bush tax cuts for those making $200,000 or more. Leave others as is.

• Give each worker a $500 credit to offset payroll taxes.

• Eliminate income taxes for seniors making less than $50,000 per year.

• Allow nonitemizers to deduct mortgage interest.

• Increase payroll taxes for workers making more than $200,000.

Note: The nonpartisan Tax Policy Center said McCain's plan could grow the economy by cutting taxes for corporations and the wealthy, but it also would increase the budget deficit. The center said Obama's plan would encourage more low-income people to join the work force. But it questions his plans to help seniors and homeowners, two groups already favored under the tax code. For more information, go to

Sorting out the truth on taxes 09/20/08 [Last modified: Monday, September 22, 2008 11:28am]
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