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Latest Obama Ad on Taxes Contains Half-Truths, Misleading Claims

By: Gerald Prante

Barack Obama's latest ad on the issue of taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es makes many claims about his own tax plan and that of John McCain that stretch the truth and mislead voters.

Here's the transcript of the ad:

Announcer: "On taxes, who's on your side? John McCain pledges hundreds of billions in corporate tax breaks. Billions for oil companies. But for 100 million households — nothing. And McCain's health plan would tax benefits for the first time ever, meaning higher income taxes for millions. Barack Obama: no tax hikes on any families earning less than a quarter-million dollars. And three times as much middle class tax relief as McCain…for the change we need."

Obama: "I'm Barack Obama, and I approve this message."

How much of this is totally true? Not much. Let's take the claims in turn.

Claim: "John McCain pledges hundreds of billions in corporate tax breaks. Billions for oil companies."

Truth: McCain cuts taxes for all corporations, whether it is Coca-Cola or Exxon Mobil. Of course Obama would point out oil companies who Americans have a negative view of. I'm surprised he didn't say tobacco companies too. Furthermore, corporations don't pay taxes. All taxes are paid by people. So a tax on a corporation is paid by one of three parties: owners of capital, workers, or consumers.

Claim: "But for 100 million households — nothing."

Truth: To make this claim, Obama is referring to McCain's tax plan for tax year 2009 and using a baseline of current law plus an AMT patch. In other words, he doesn't give McCain credit for the tax cut of patching AMT. He is also not counting McCain's health care tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. for that year, which is actually a huge tax cut in that year. And he's also not giving McCain credit for the fact that a corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. cut benefits individuals.

Claim: "And McCain's health care plan would tax benefits for the first time ever, meaning higher income taxes for millions."

Truth: It is true that McCain's health care plan would tax benefits, but most taxpayers would actually receive a tax cut over the next ten years from this plan. In fact, over the next ten years, it is a $1.3 trillion tax cut. Some taxpayers would face higher taxes, and more would face tax hikes as time progressed; but Obama doesn't tell you that most of those millions facing higher taxes would actually be high-income taxpayers who have generous health care plans and are in high marginal tax rateThe marginal tax rate is the amount of additional tax paid for every additional dollar earned as income. The average tax rate is the total tax paid divided by total income earned. A 10 percent marginal tax rate means that 10 cents of every next dollar earned would be taken as tax. s, who are ironically the same type of people Obama is targeting for tax hikes.

Claim: "No tax hikes on any families earning less than a quarter-million dollars."

Truth: Not correct. Tax Policy Center has shown that some tax units making less than $250,000 would actually face higher tax bills under Obama because Obama raises corporate income taxes, and Tax Policy Center rightly accounts for that as being paid by individuals. In fact, TPC (who is the source Obama uses for many of his claims), 14.8 percent of tax units earning between $111,645 and $160,972 would face a tax increase.

Claim: "And three times as much middle class tax relief as McCain."

Truth: On this claim, Obama uses a Tax Policy Center estimate that shows the typical tax unit in the middle 20 percent would save $1,118 from Barack Obama's tax plan in 2009. That figure for McCain's tax plan is $325. This doesn't include Sen. McCain's health care tax plan, which according to the same TPC publication, would save the typical middle-income tax unit over five times as much as a middle-income tax unit under Obama's health care plan for 2009. Now these figures are not additive with the tax estimates that exclude the health care provisions, but including them would assuredly reduce the "three times" figure. Finally, this claim (ignoring health care) uses a current law baseline for 2009 and includes the corporate provisions, which is a different baseline Obama used in making the claims earlier in the ad.

I guess this shouldn't surprise us. Neither the Obama campaign nor the McCain campaign really cares about being honest with the voter. They just tell you the voter what sounds good, regardless if it's true or not.