On a Thursday afternoon conference call with reporters, one of Barack Obama's top economic advisers put out a direct challenge to John McCain. After reiterating the campaign's pledge not to raise taxes on families making less than $250,000 a year, Jason Furman said: "John McCain cannot make a similar promise for his tax plan."
Instead, Furman alleged, the Arizona Republican's campaign is resorting to spreading misinformation about the Obama plan.
Explaining why McCain can't promise not to raise taxes on middle class families, Furman cited the Arizona Republican's plan to tax employer-provided health care and give tax credits directly to consumers. Alleging that the exploding cost of health care will likely outpace the rate of the tax credit's growth, which is tied to Consumer Price Index inflation, Furman accused McCain of potentially raising taxes on middle class families. (A charge also made in a recent New Republic piece.)
Also during the call, Obama's economic team unveiled a more detailed website for its own tax plans, one that includes a chart that shows what kind of tax cut various individuals would be able to expect (all the scenarios depicted result in a tax cut).
That's supported by the Tax Policy Center's recent analysis of Obama's plan, in which four-fifths of taxpayers would see an increased percentage of after-tax income.
Furman also reiterated several of the statistics that he and Obama adviser Austin Goolsbee put forward in today's Wall Street Journal.
- The top two income-tax brackets would return to their 1990s levels of 36% and 39.6% (including the exemption and deduction phase-outs). All other brackets would remain as they are today.
- The top capital-gains rate for families making more than $250,000 would return to 20% -- the lowest rate that existed in the 1990s and the rate President Bush proposed in his 2001 tax cut. A 20% rate is almost a third lower than the rate President Reagan set in 1986.
- The tax rate on dividends would also be 20% for families making more than $250,000, rather than returning to the ordinary income rate. This rate would be 39% lower than the rate President Bush proposed in his 2001 tax cut and would be lower than all but five of the last 92 years we have been taxing dividends.
- The estate tax would be effectively repealed for 99.7% of estates, and retained at a 45% rate for estates valued at over $7 million per couple. This would cut the number of estates covered by the tax by 84% relative to 2000.
Overall, in an Obama administration, the top 1% of households -- people with an average income of $1.6 million per year -- would see their average federal income and payroll tax rate increase from 21% today to 24%, less than the 25% these households would have paid under the tax laws of the late 1990s.
The McCain campaign was, unsurprisingly, dismissive:
Barack Obama has voted in support of higher taxes 94 times in just 3 years, including higher taxes for Americans making just $42,000 a year. If voters consider Barack Obama's record of opposing tax cuts and his outspoken proposals to raise taxes on family savings, Social Security and small businesses -- this latest campaign promise lacks a single shred of credibility."
The libertarian, free-market Cato Institute gave a more nuanced reaction to Obama's claims. Their health care expert Michael Cannon said he didn't particularly like McCain's heath care tax credit, but he called Furman's critique "too cute by half."
"The average 'employer contribution' to the average family policy is $9,000," Cannon said.
"McCain's tax credit would level the playing field between job-based and individual-market health insurance. With no tax penalty encouraging workers to let their employer control that $9,000, the labor market would gradually force employers to add that money to workers' cash wages. Letting workers own and control that money is nothing if not a tax cut. ... We call the current exclusion a tax break, even though it denies workers the ability to control $9,000 of their compensation. If government took $9,000 from workers and used it to provide workers with health insurance, then we would call that a tax. Yet when government effectively takes that money from workers and gives it to employers, we rather curiously call it a tax 'cut.'"
Still, given a tight labor market, isn't it possible that companies could just pocket the difference, take advantage of a trend toward wage stagnation overall, and dare workers to quit?
Cannon was skeptical, but admitted: "You're right about this: it is only over the long term that the labor market will force employers to increase wages. In the short term, an employer with some wiggle room could screw its workers over. I think that uncertainty will be the biggest political obstacle to McCain's tax credit."
However, he still disagreed with Obama's advisers overall, noting that the costs of health care would be, in turn, dynamically affected by McCain's plan in a way they had failed to grapple with:."Had Furman and Goolsbee taken all of these factors into account and then made a cogent argument that the tax credit would increase taxes, then that would be fair game. But that's not what they did," Cannon said.
Still, even if there's only "wiggle room" to suggest that the Arizona Republican's gambit would effectively raise taxes on middle class families, that seems like more than fair game for Obama to point out in reaction to McCain's consistent distortions on tax policy.
When asked by the Huffington Post if the Obama campaign planned to push harder with ads on the potential McCain tax increase, Furman mostly demurred, and went back to talking about the public's need to understand CPI inflation. It was, perhaps, a question better suited for a media strategist, though it seemed the economic team had the makings of an attack line that has yet to be fully exploited by the campaign.