New Ads from Rightchange.com Attacking Obama: More Falsehoods

October 2, 2008

Rightchange.com, a 527 based out of North Carolina, has been running ads on cable television attacking Barack Obama. They have new ads about Obama's supposed connections with Fannie and Freddie, , as well as a new ad attacking Obama on taxes on top of the one that has been running recently. Here it is:

The ad says "Can you really tax many small businesses at 62 percent?" That statement is highly misleading. Obama's marginal tax rate on small businesses isn't even going to be 62 percent. A 39.6 percent top rate plus 2.9 percent for Medicare plus 1.2 percent phase-out of deductions/exemptions plus 10 percent state rate (top rate) plus 4 percent increase in Social Security tax, which he has said is not immediate. Only then do you get to 57.7 percent (ignoring deductibility of state income tax). What makes it even worse though is that this is the marginal rate, not the average. No small business would be paying 62 percent of its total income in taxes, or really anywhere close to that. It's just ridiculous.

Regarding the claim that his tax plan would reduce wages for millions of workers by 17 percent, this comes from rightchange.com calculations based on Michael Boskin's analysis of Barack Obama's tax plan. Although their calculations are not spelled out on their website, it appears that rightchange.com merely took the marginal after-tax return to $1 of earnings under current law and subtracted that from Boskin's calculation under Obama law, which was 17.7 percentage points. Such a calculation though is totally bizarre. First, if you assumed that it was the average after-tax return, the percent change would actually be higher than 17 percent. But again, the main problem is they are mixing marginal with average, as well as ignoring Obama's payroll tax donut hole. According to TPC estimates of Obama's stump speech version that includes the payroll tax hike for 2012, the aggregate after-tax income of those in the top 0.1 percent under Obama's plan (those that would be most hit by this marginal rate hike) would see a reduction in after-tax income of 12.8 percent, which is far lower than 17 percent wage reduction, relative to a current policy baseline that even assumed the Bush tax cuts were extended. In summary, saying that millions of people would face a 17 percent reduction in wages under Obama is baloney as well.

The final claim regarding the carpenters and nurses that would face a tax hike refers to an Investor's Business Daily article that quoted such figures courtesy of a Heritage Foundation study. That study analyzed who would be affected by a full repeal of the payroll tax cap with no donut hole. That policy position has since been clarified by the Obama campaign (regarding his donut hole), and therefore, Obama's true position is highly distorted by this advertisement.


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