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More Misleading Ads from Obama on Taxes

3 min readBy: Gerald Prante

Sen. Obama's new ad entitled "Spending Spree" attacking Sen. McCain's tax cuts as costly "spending" contains accurate figures, but is still highly misleading in some respects.

The first claim regarding the cost of his 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. cuts being over $3 trillion (excluding health insurance credit) is 100 percent correct. However, Obama calls McCain's tax cuts as new spending, which is kind of odd. There are parts of McCain's plan that are similar to spending (tax expenditures), but much of the deficit-financed cost comes from reductions in tax rates.

Regarding the privatization of Social Security, McCain has not indicated in this campaign that he would support the Bush privatization plan. He did support it four years ago, but in this campaign, he has called for a panel a la Reagan/Greenspan/etc. to secure the future of Social Security (which is not in as dire straits as Medicare). When discussing this issue on ABC's This Week about a little over a month ago, McCain said that he would even consider a tax increase, which if you recall, set off a firestorm among the anti-tax community.

The last figure cited in the ad ($1.3 trillion to insurance companies) is the most misleading. It refers to John McCain's health insurance 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. that would cost $1.3 trillion over 10 years. Well, at least the Obama campaign is now saying it is a tax cut. Biden has been on the campaign trail calling it a huge tax increase.

But the number is misleading because it only refers to the fact that under McCain's health insurance plan, the health insurance credit would go directly to health insurance companies that provide the health insurance to the individual or family. The ad doesn't tell you that the health insurance companies don't get the money unless they provide the health insurance to the individual or family.

By this line of reasoning, we could say that Obama's health care plan gives trillions of dollars to doctors, ignoring the fact that the doctors are providing a service to patients. We could also say that Obama's mortgage interest credit goes to "Wall Street" or "Big Housing" since some of it may lead to more borrowing, higher interest rates, and higher home prices. This is a question of economic incidence at its core, but Obama is assuming that where the check flows is who benefits. Others like Tax Policy Center assumed that the health insurance credit benefits the insured individual or family, even though the factor of production receives the check.

This type of misleading information is typical of the Obama campaign: pick out an industry that is less than favorable in the public light (like oil or insurance) and provide misleading information that claims McCain supports that industry with his policies that have no such intention. Don't worry…I'm sure the McCain campaign is working on a dishonest advertisement in response; and I bet it will say something to the effect of "Obama will raise your taxes."