Obama’s tax plan is exactly the opposite of the supply-side economics that Reagan adopted, which produced the astounding boom of the 1980s. That boom, in fact, lasted 25 years, from 1982 to 2007, as Art Laffer and Steve Moore discuss in their new book,
The End of Prosperity. Laffer and Moore explain that more wealth was produced during those 25 years than in the previous 200 years of American history.
Obama’s tax plan is also exactly the opposite of President Kennedy’s, which produced another astounding boom in the 1960s. Pursuing the exact opposite policies from Kennedy and Reagan will produce exactly the opposite results.
(Note also that Obama’s tax increases will not produce nearly enough revenue to finance all his lavish spending proposals, as shown by a brilliant new paper from Alan Reynolds of the Cato Institute. And by the way, Bill Clinton campaigned in 1992 promising a tax cut for the middle class — after he was elected he dropped that idea, adopting tax increases for people making as little as $20,000 per year.)
Finally, Obama’s “tax cut,” if he follows through with it, will often be a simple giveaway. As it stands right now, roughly one-third of income earners pay no federal income taxes. Many actually receive payments from the income-tax system — these payments total 3.8 percent of all federal taxes paid. Simple arithmetic holds that if one-third of earners don’t pay income tax, it’s impossible to cut taxes for 95 percent of earners.
Obama’s “tax cut” is, in reality, a $500-per-worker refundable income-tax credit for workers making up to $75,000 per year, and for families making up to $150,000. The term “refundable” means that if the worker does not have enough tax liability to take advantage of the credit, the government sends the worker a check to cover the full amount of the credit anyway. It is like George McGovern’s 1972 promise of a $1,000 check for everyone, which the American people rejected as a crass vote-buying scheme.
Besides the $500-per-worker credit, Obama proposes a slew of income-tax credits targeted toward low- and moderate-income people, also refundable. Obama proposes such tax credits for child care, education, housing, retirement, health care, welfare, etc.
Though the people receiving these credits will spend the money, the programs will probably hurt the economy on net, because the credits will be phased out at higher income levels. This, in effect, constitutes yet another marginal tax on high-income earners, and thus another blow to their incentives to be productive.
These programs alone would cost $1.3 trillion over ten years. I call it The New Tax Welfare.
— Peter Ferrara is director of entitlement and budget policy for the Institute for Policy Innovation, and general counsel of the American Civil Rights Union. He formerly served in President Reagan’s White Office of Policy Development, and as associate deputy attorney general of the United States under the first President Bush.< Back 1 2 
