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Q: How much will the tax penalty be for going without health insurance?
A: The minimum assessment will be $695 per person (but no more than $2,085 per
family) in 2016, when fully phased in. The amount can be higher depending on income. But
there are exemptions for low-income persons and others.
FULL QUESTION
For once, were asking this question of ourselves, knowing that our readers will be curious about
it now that the Supreme Court has upheld the key portions of the Affordable Care Act. Well also
ask and answer these questions:
Is it a tax or a penalty?
If I choose to go without health coverage, how much will I have to pay?
Who will collect it?
What if I am covered for only part of the year?
What if I refuse to pay?
Are there exemptions?
How many people will pay?
FULL ANSWER
Lets take those questions in order.
Is It a Tax or a Penalty?
We will be using the terms interchangeably from now on. Whatever you call it, its the functional
equivalent of a tax, and the Supreme Court has ruled that it is an exercise of the taxing power of
Congress.
The law labels the assessment a penalty (see Section 5000A) and avoids using the term tax.
But Chief Justice John Roberts, writing for the five justices in the majority, said the penalty can
be considered a tax that is within the power of Congress to impose.
His reasons are set out starting on page 33 of the opinion. Among other things, Roberts
concluded that the penalty was not intended to be a criminal fine, because those who choose to
pay it, rather than honor the mandate to obtain health insurance, would be in full compliance
with the law. He also noted that the amount is not prohibitively high:
Chief Justice John Roberts: [F]or most Americans the amount due will be far less than the
price of insurance, and, by statute, it can never be more.
How Much?
The minimum amount per person will be $695 once the tax is fully phased in. But it will
be less to start. The minimum penalty per person will start at $95 in 2014, the first year that the
law will require individuals to obtain coverage. And it will rise to $325 the following year.
Starting in 2017, the minimum tax per person will rise each year with inflation. And for children
18 and under, the minimum per-person tax is half of that for adults.
However, the minimum amount per family is capped at triple the per-person tax, no matter how
many individuals are in the taxpayers household. So, for example, a couple with one child over
18 (or two children age 18 or under), and no coverage, would pay a minimum of $285 in 2014,
$975 in 2015 and $2,085 in 2016. And that would be the minimum no matter how many
uninsured dependents a taxpayer has.
The tax would be more for persons with higher taxable incomes. When phased in, it will be 2.5
percent of household income that exceeds the income threshold for filing a tax return. For 2011,
those thresholds were $9,500 for a single person under age 65, and $19,000 for a married person
filing jointly with a spouse. So, to give a rough calculation, a couple with $100,000 of income
might pay a tax of $2,025 if they choose to go without coverage.
But the penalty can never exceed the cost of the national average premiums for the lowest-cost
bronze plans being offered through the new insurance exchanges called for under the law. We
have no way of knowing what that average rate might turn out to be in 2014, but there is reason
to think it could be quite high. For example, the total cost of a basic Government Employees
Health Association plan currently offered through the Federal Employee Health Benefit program
(the model for the state insurance exchanges) totals $9,459 per year for a family plan, and $4,159
for individual coverage.
Update, June 29: The cost of a bronze plan could be higher, however. In January 2010 the
nonpartisan Congressional Budget Office issued this estimate:
CBO, Jan. 11, 2010: Overall, CBO estimates that premiums for Bronze plans purchased
individually in 2016 would probably average between $4,500 and $5,000 for single policies and
between $12,000 and $12,500 for family policies.
CBO has not issued any new estimate since that one, according to spokeswoman Deborah
Kilroe.
Who Collects?
The penalty will be collected by the Internal Revenue Service, which is one reason the chief
justice cited for considering it to be a tax. In fact, the penalty is spelled out in Title 26 of the U.S.
Code the Internal Revenue Code under Subtitle D Miscellaneous Excise Taxes.
Partial Coverage
A tax is assessed for each month that a person is not covered. It is pro-rated, so that a person who
is not covered for only a single month would pay 1/12th of the tax that would be due for the full
year.
So, for example, the minimum tax per person for failing to get coverage would be $7.92 for each
month of 2014, $28.75 for each month of 2015, and $57.92 for each month of 2016, when fully
phased in.
Refusal to Pay
The law prohibits the IRS from seeking to put anybody in jail or seizing their property for simple
refusal to pay the tax. The law says specifically that taxpayers shall not be subject to any
criminal prosecution or penalty for failure to pay, and also that the IRS cannot file a tax lien (a
legal claim against such things as homes, cars, wages and bank accounts) or a levy (seizure of
property or bank accounts).
The law says that the IRS will collect the tax in the same manner as an assessable penalty under
subchapter B of chapter 68 of the tax code. That part of the tax code provides for imposing an
additional penalty equal to the total amount of the tax evaded, or not collected. It also requires
written notices to the taxpayer, and provides for court proceedings.
So it may turn out that the IRS will be suing those who fail to pay the tax for double the amount.
But so far, the IRS has not spelled out exactly how it will enforce the new penalty with the
limited power the law gives it.
Whos Exempt?
The law makes a number of exemptions for low-income persons and hardship cases.
Individuals who cannot afford coverage: If an employer offers coverage that would cost the
employee more than 8 percent of his or her household income (for self-only coverage) that
individual is exempt from the tax.
Taxpayers with income below filing threshold: Also exempt are those who earn too little to
be required to file tax returns. For 2011 as previously mentioned those thresholds were
$9,500 for a single person under age 65, and $19,000 for a married person filing jointly with a
spouse, for example. The thresholds go up each year in line with inflation, so those cut-offs will
be higher in 2014, when the tax first takes effect.
Hardships: The Secretary of Health and Human Services is empowered to exempt others that
she or he determines to have suffered a hardship with respect to the capability to obtain
coverage.
Other exemptions: Also exempt are members of Indian tribes, persons with only brief gaps in
coverage, and members of certain religious groups currently exempt from Social Security taxes
(which as weve previously reported are chiefly Anabaptist that is, Mennonite, Amish or
Hutterite).
However, since then, CBO has increased its estimate. In an estimate released in March of this
year, CBO projected that the tax would yield $6 billion for the government, up from the $4
billion it estimated two years earlier. Thats a 50 percent higher total, and would seem to imply
that CBO now expects about 6 million will be paying. But CBO didnt give a specific figure for
the number of persons it now expects to pay.
Brooks Jackson
Sources
Pettit, Carol A. and Edward C. Liu. The PPACA Penalty Provision and the Internal Revenue
Service. Congressional Research Service. 30 Apr 2010.
United States Supreme Court. National Federation of Independent Businesses et al. v. Sebelius.
28 Jun 2012.
26 USC 5000A Requirement to maintain minimum essential coverage. Cornell University
Law School Legal Information Institute. Undated. Accessed 28 Jun 2012.
Internal Revenue Service. Table 1: 2011 Filing Requirements Chart for Most Taxpayers
Publication 501. Undated. Accessed 28 Jun 2012.
U.S. Office of Personnel Management. Non-Postal Premium Rates for the Federal Employees
Health Benefits Program. Undated. Accessed 28 Jun 2012.
26 USC 6672. Failure to collect and pay over tax, or attempt to evade or defeat tax. Cornell
University Law School Legal Information Institute. Undated. Accessed 28 Jun 2012.
Henig, Jess. Dhimmitude and the Muslim Exemption. FactCheck.org. 20 May 2010.
Congressional Budget Office. Payments of Penalties for Being Uninsured Under the Patient
Protection and Affordable Care Act. 22 Apr 2010.
Congressional Budget Office. Updated Estimates for the Insurance Coverage Provisions of the
Affordable Care Act. 13 Mar 2012.
Comments (0)
Q: Does the new health care law require workers to pay income tax on the value of
employer-provided health insurance?
A: No. The value will appear on employees W-2 forms for information purposes, but
will not be considered taxable income.
FULL QUESTION
I would like to know how accurate the following e-mail claim is:
You really need to read thisstarts next year
This is supposed to be part of the new Health Care Bill.
The originator of this notice contacted his Congressman about House bill HR3590 the health care
bill, that just passed, and asked for a summary of changes. An aid directed him to go to www:
thomas.gov ; enter HR3590 in the search Box and look for summaries.
Starting in 2011 (next year folks) your W 2 tax form sent by your employer Will be increased to
show the value of what ever health insurance you are Given by the company. It does not matter if
thats a private concern or Governmental body of some sort. If youre retired ? So what; your
gross Will go up by the amount of insurance you get.
The dollar value (cost of what the company pays for your insurance) will be considered income
and added to your gross pay. You will be taxed on the total.
Click to expand/collapse the full text
You will be required to pay taxes on a large sum of money that you have never seen.
Take your tax form you just finished and see what $15,000 or $20,000
Additional gross does to your tax debt. Thats what youll pay next year.
For many it also puts you into a new higher bracket so its even worse.
This is how the government is going to buy insurance for 15 % that dont
Have insurance and its only part of the tax increases.
Not believing this I researched the summaries and heres what I read:
On page 25 of 29 :
TITLE IX REVENUE PROVISIONS- SUBTITLE A: REVENUE OFFSET PROVISIONS-(sec
.
9001 , as modified by sec. 10901)
Sec.9002. "requires employers to include in the W-2 form of each employee the aggregate cost
of applicable employer sponsored group health coverage that is excludable from the employees
gross income."
Joan Pryde is the senior tax editor for the Kiplinger letters. Go to
Kiplingers and read about 13 tax changes that could affect you. Number 3 is what I just told you
about.
Why am I sending you this ?. The same reason I hope you forward this to every single person in
your address book.
People have the right to know the truth because an election is coming in November
FULL ANSWER
Heres another one to add to the list of false claims about the new health care law.
Its true that the value of employer-paid health insurance will be added as an information item on
W-2 forms. But contrary to this widely circulating chain e-mail, it definitely will not be
considered taxable income.
Readers who followed the 2008 presidential campaign may recall that it was Republican
candidate John McCain who proposed to make the value of employer-sponsored health insurance
taxable. Democrats hated that idea; Barack Obama ran an ad claiming, falsely, that it would be
the "largest middle-class tax increase in history."
So it is ironic that some of President Obamas critics now claim that the bill he signed would do
what his opponent proposed and he denounced. Ironic, but false.
The e-mails author correctly quotes a Congressional Research Service summary of the bill that
became law (H.R. 3590), noting that Section 9002 "Requires employers to include in the W-2
form of each employee the aggregate cost of applicable employer-sponsored group health
coverage." But the author then goes on to conclude quite incorrectly that this amount will
be "added to your gross pay" and that "[y]ou will be taxed on the total." The CRS did not say
that, and neither does the legislation itself. In fact, the value will continue to be untaxed, just as
in the past.
The e-mails author also claims that an article written by Joan Pryde, a senior editor of the
Kiplinger letters, backs up the claim: "Go to Kiplingers and read about 13 tax changes that could
affect you. Number 3 is what I just told you about." But the truth is that the Kiplinger letters
actually contradicts the claim.
Prydes article is dated April 5 and is headlined "Health Care Reform: Tax Hikes on the Way
Here are 13 changes in the massive overhaul that could impact your tax bill, for better or worse."
Among them:
3. A requirement that businesses include the value of the health care benefits they provide to
employees on W-2s, beginning with W-2s for 2011. The amount reported is not considered
taxable income.
The author of this false e-mail seems to have missed the second sentence in that paragraph the
part that says the amount "is not considered taxable income."
Brooks Jackson
Sources
Pryde, Joan. "Health Care Reform: Tax Hikes on the Way." Kiplinger letters. 5 Apr 2010.
United States. Cong. Senate. 111th Congress, 2 nd Session. H.R. 3590, "The Patient Protection
and Affordable Care Act." (Enrolled as Agreed to or Passed by Both House and Senate).
accessed 26 May 2010.
Comments (0)
Q: Would Senate bill 2099 put a yearly $50 tax on each privately owned firearm?
A: There is no such bill. A chain e-mail containing bogus claims refers to a bill that died
more than eight years ago.
FULL QUESTION
Is this one legit?
Subject: IRS GUN CONTROL BILL
Click to expand/collapse the full text
Senate Bill SB-2099 gun control via IRS?
Yes! Thats what they are doing
GUN Control via IRS Senate Bill SB-2099 will require us to put on our 2009 1040 federal tax
form all guns that you have or own. It may require fingerprints. And a tax of $50 per gun. This
bill was introduced on Feb. 24. This bill will Become public knowledge 30 days after it is voted
into law.
This is an amendment to the Internal Revenue Act of 1986. This means that the Finance
Committee can pass this without the Senate voting on it at all. The full text of the proposed
amendment is on the U.S. Senate homepage, http://www.senate.gov/ You can find the bill by
doing a search by the bill Number, SB-2099. You know who to call; I strongly suggest you do.
FULL ANSWER
S. 2099 (not "SB" 2099) was introduced Feb. 24, 2000, by Democratic Sen. Jack Reed of Rhode
Island. He called it the "Handgun Safety and Registration Act of 2000," and as the title implies it
would have applied only to handguns, not to "all guns you have or own."
Its true that the bill would have required owners of handguns to register them with the federal
government within one year, under the 1934 National Firearms Act (which is part of the Internal
Revenue Code). That law requires a federal permit to own a machine gun, a sawed-off rifle or
shotgun, or a silencer. Reed said in a news release that in practical terms, handgun owners would
need to fill out a registration form, get fingerprinted by local law enforcement officials and
obtain a local "Law Enforcement Certification." These would be sent to the Bureau of Alcohol,
Tobacco and Firearms, along with a recent photo (2 inches by 2 inches) and a $5 registration fee.
False Claims
The bill would indeed have required a $50 tax on each handgun, but it would have been a onetime tax, not an annual tax. And it would have been imposed on the manufacturer, not on the
owner as erroneously claimed in the e-mail. That cost would no doubt have been passed on to
buyers in the form of a higher price for each new handgun, but handgun owners would not have
been required to record their guns on their annual federal income tax forms, as wrongly claimed
in the e-mail.
Another false claim is that the bill "will become public knowledge 30 days after it is voted into
law." In fact, it was public knowledge as soon as Reed introduced it and announced that in the
Congressional Record. The claim that the "Finance Committee can pass this without the Senate
voting on it at all" is nonsense, as any high-school civics student should know. It would have
become law if passed both by the full House and Senate and signed into law by the president.
That didnt happen. The bill was referred to the Senate Finance Committee, and it eventually
attracted two cosponsors. But when the 106th Congress adjourned at the end of 2000, the bill
died without getting so much as a subcommittee hearing, let alone a vote. Reed has not
reintroduced the bill since then.
-Brooks Jackson
Sources
U.S. Senate. "S. 2099, Handgun Safety and Registration Act of 2000." (as introduced 24 Feb
2000.)
United States Code. "Title 26, National Firearms Act. 6 Jul 2009.
U.S. Congressional Record. 24 Feb. 2000: S812.
Comments (0)
FULL QUESTION
Any idea if this is true?
Chain e-mail text: Why doesnt Rahm Emanuel pay property taxes?
Click to expand/collapse the full text
According to the Cook County Assessors website, the Chicago home of four-term Democrat
Congressman and new White House Chief of Staff, Rahm Emanuel, doesnt exist. While the
address of 4228 North Hermitage is listed as Emanuels residence on the Illinois State Board of
Elections website, there seems to be no public record of Emanuel ever paying property taxes on
this home.
The Cook County Assessors and Cook County Treasurers online records indicate Emanuels
Chicago neighbors pay between $3,500 and $7,000 annually. However, Illinois Review has been
unable to locate any evidence that the former Clinton advisor and investment banker is paying
his fair share of Cook Countys notoriously high tax burden.
Why wouldnt 4228 North Hermitage property owners Rahm Emanuel and wife Amy Rule pay
property taxes?
One reason may be because Emanuel and Rule declared their 4228 North Hermitage home as the
office location for their personal non-profit foundation called the "Rahm Emanuel and Amy Rule
Charitable Foundation". As the non-profits headquarters, their home could be exempt from
paying property taxes.
In January 2007, USA Today reported on Emanuels foundation:
The Rahm Emanuel and Amy Rule Charitable Trust was formed in 2002, when the Chicago
lawmaker was first elected. The former Clinton White House aide and his wife, Amy Rule, are
its only donors. Emanuel was an investment banker after serving in the White House.
The trust reported having $2,900 on hand at the end of 2005 after receiving $34,000 from
Emanuel and donating more than $31,000 During the past three years, Emanuels charity gave
nearly $25,000 to the Anshe Emet synagogue and school [a private school that the Rahm/Rule
children attend], and $15,000 to the foundation run by former president Bill Clinton. It also
gave $14,000 to Marwen, a Chicago charity that provides art classes and other educational help
to low-income children. Rule is on Marwens board.
(He doesnt pay any property taxes and he gets income tax write-offs by donating $25,000 to the
Synagogue and other amounts of money to his Foundation. This allows his kids to attend school
tuition-free and allows him to expense a lot of personal expenses. What a racket!
Take all your income and donate it back to yourself via tax exempt orgs. where you can spend it
on things such as expenses to operate your car, pay the electric and water bills, etc.
(Apparently if you are a hypocritical "liberal" democrat who advocates raising taxes on everyone
else, this is all permissible.)
Emanuels 4228 North Hermitage home is one of the largest in the neighborhood, with a side
yard that appears to be a vacant lot, making the Emanuels property the largest portion on the
block.
Other North Hermitage homes on Emanuels block are valued in the $500,000 plus range.
According to Cook County Treasurers website, the Chicago owners of nearby 118 year old 4222
North Hermitage pay almost $6800 annually. The family at 4224 North Heritage pays $6000
each year in property taxes.
President Obama himself a connected, Chicago insider, who has benefited from questionable
land deals may find it difficult to explain why his very own Chicago-based chief of staff
doesnt pay property taxes like the "little guy" he claims to represent. Or perhaps allowing his
wealthy friends to avoid taxes is part of Obamas trickle down redistribution economics. Its
certainly the kind of "change" we Illinoisans can believe insince were quite familiar with it
here in the federal indictment land of Daley, Blagojevich, Madigan, Jones, Cellini, Rezko,
.and maybe, soon .. Burris.
FULL ANSWER
Not only does White House Chief of Staff Rahm Emanuel pay his property taxes, but he pays
them in advance. Property taxes for the first half of 2008 were due on Tuesday, March 3, 2009.
Emanuel paid his on February 23. Last year, he paid $13,022.60 in taxes on his home.
The e-mail above is taken from a post made by the conservative blog Illinois Review on Nov. 6,
2008 (the site has now removed the post, but it lives on in chain e-mail form). It says that there is
no record of Emanuel ever paying property taxes on his home in Chicago and cites a number of
sneaky ways that Emanuel could have gotten out of paying the taxes. But the very premise of the
post is wrong: Illinois Review bloggers needed to do a little more reporting before jumping to
conclusions. The reason they didnt find tax records is that Emanuels mailing address is
different from his official property location in the Cook County tax records.
"His house sits on two lots," said Eric Herman at the Cook County Assessors Office. Its not at
all unusual, Herman told us, for combined lots to use one address for mail even though a
different address is associated with the propertys permanent index number used in tax records.
Cook County assesses homes using PINs for exactly this reason; addresses can change when lots
are broken up or combined. "The bottom line," says Herman, "is that its the same property. Two
lots, one PIN number." In fact, tax records for Emanuels house show both addresses one for
the property location, and one for the mailing address. Anyone can access the tax information
with the PIN (14-18-408-035-0000), and weve posted a pdf of the record here so you can see for
yourself.
Herman said that the Illinois Review bloggers had searched the Cook County records by address,
not by PIN, using the mailing address from Emanuels financial disclosure form. He notes that
they didnt call the assessors office or make any attempt to verify the information. In fact,
Herman told us he posted comments on the blog alerting IR to the error, but his comments were
deleted. IR took the entire post down a day later, citing "government intimidation." The site also
posted a follow-up reasserting that Emanuels mailing address had no associated tax records, but
acknowledging that "Emanuels foundation has no impact on his property taxes."
The follow-up closes by saying, "Where there is smoke, there is usually fire." No word on
whether this applies when the smoke is a mirage.
-Jess Henig
Sources
Office of the Cook County Treasurer. 2008 and 2007 tax year information for 4232 N.
Hermitage Ave. Accessed 4 Mar. 2009.
Illinois Review. "Where Theres Smoke" 6 Nov. 2008.
Comments (0)
Summary
Republicans are misrepresenting Obama's tax proposals right down to the bitter end. New radio
ads from the McCain campaign and a TV spot from the pro-Republican group Let Freedom Ring
are targeting voters nationwide with some of the same tax deceptions we've been hearing all fall,
rolled in a bundle and flung through the airwaves. One of the radio ads features Hank Williams
Jr., the other Florida Gov. Charlie Crist. But new packaging doesn't make the charges any less
false.
Taxes wouldn't have gone up on "families" making as little as $42,000 under the budget
resolution passed last spring, as the Charlie Crist ad says. Try $90,000 for a typical
family of four. And anyway, that measure doesn't at all resemble what Obama's actually
proposing to do.
The Let Freedom Ring ad claimed that Obama has "voted to allow the Bush tax cuts to
expire," meaning "our income taxes will actually go up." But Obama only voted to let
some of the tax cuts expire, and at any rate nobody's taxes are going up as a result of that
vote. The group yanked this ad off the air rather than try to defend it.
Echoing a recent McCain theme, Crist says, "McCain knows that people don't want to
'spread the wealth,' " condemning Obama's use of the phrase when he talked to "Joe the
Plumber." Actually, McCain has supported taxing high earners more than low
earners. Not so long ago McCain said, "Wealthy people can afford [to pay] more."
Obama's tax plan would "spread the wealth" more than McCain's, but it's not as though
McCain wants to do away with the progressive tax system we currently have.
Analysis
The McCain-Palin campaign and Republican National Committee are running the Charlie Crist
radio ad in Florida, while the Hank Williams Jr. version is running in Virginia, Colorado,
Missouri, Nevada, Pennsylvania, Ohio and several other states, according to Politico. Let
Freedom Ring was airing its TV ad in battleground states as part of a million-dollar ad buy, but
pulled the spot from the airwaves because the group felt it couldn't stand behind the ad's
assertions. Nevertheless, the ad was still prominently displayed on the group's Web site,
neverfindout.org, as of Oct. 25.
"Folks"-y Deception
taxpayer making less than $41,500 per year in total income, or any couple making less than
$83,000."
Maybe the campaign is only half-listening.
100% Wrong
Click to expand/collapse the full transcript
earners, on the other hand, would have to pay an average of $19,000 more in taxes under Obama,
while under McCain they'd see their taxes cut by an average of $125,000.
Gov. Charlie Crist: Hi, this is Governor Charlie Crist. Let me tell you why I support my friend
John McCain. He will lower your taxes. He will stop wasteful government spending. And John
McCain knows that people don't want to "spread the wealth." He knows that Congress should let
you keep more of your money, and not take it away. Thank you very much.
Announcer: Your savings, your job and your financial security are under siege. Congressional
liberals will make it worse. Congressional liberals plan nearly a trillion dollars in new
government spending. To pay for it, Congressional liberals promise higher taxes on American
families making over $42,000 a year. Barack Obama and Congressional liberals call it spreading
the wealth around, we call it higher taxes, bigger government. Either way, it will cost you. Stop
'em before they make it worse.
Paid for by McCain-Palin 2008 and the Republican National Committee.
John McCain: I'm John McCain and I approve this message.
The Crist ad refers to the phrase "spread the wealth," which was used by Obama in his nowfamiliar conversation with Joe Wurzelbacher in Toledo.
What Obama was saying is that giving tax breaks that have disproportionately benefited upperincome taxpayers leaves those further down the scale "pinched," with the result that "business is
bad for everybody."
Obama, Oct. 12: [W]e've cut taxes a lot for folks like me who make a lot more than $250,000.
We haven't given a break to folks who make less. It's not that I want to punish your success, I
just want to make sure that everybody who is behind you, that they've got a chance at success,
too. And everybody is so pinched that business is bad for everybody. And I think when you
spread the wealth around, it's good for everybody.
Obama was wrong about one thing; the Bush tax cuts did in fact give tax breaks "to folks who
make less," including the previously mentioned 10 percent tax bracket, "marriage penalty" relief
and an increase in the per-child tax credit, all of which Obama proposes to keep. What his plan
would do is provide even more tax benefits at the middle and low end of the scale, while
increasing taxes at the top.
This way of "spread[ing] the wealth around" is hardly a new concept. The United States already
has a progressive tax system by which high earners are taxed at higher rates than those who
make less. Obama would make it somewhat more progressive. (The Williams ad uses the term
"taxing the rich.")
McCain himself hasn't always seemed so opposed to progressive taxation. Here's what he said in
a 2000 meeting with college students sponsored by the MSNBC program "Hardball," when
questioned about the issue:
McCain, Oct. 12, 2000: [W]e feel, obviously, that wealthy people can afford more.
.
And I think middle-income Americans, working Americans all of the taxes that working
Americans pay, I think they you would think that they also deserve significant relief, in my
view.
[H]ere's what I really believe, that when you are reach a certain level of comfort, there's
nothing wrong with paying somewhat more.
In fact, the system would remain progressive under McCain's tax plan. His argument with
Obama isn't about whether to "spread the wealth," but by how much.
Also, as we now know, Joe the Plumber would almost certainly be entitled to a tax cut if
Obama's plan were implemented and a larger one than he'd get under McCain's.
Outside analysts like the nonpartisan Committee for a Responsible Federal Budget have found
that neither Obama nor McCain would come close to balancing the federal budget without
additional spending cuts or tax increases that they have yet to specify.
by Viveca Novak and Jess Henig
Sources
Dann, Carrie. "McCain's tax evolution," FirstRead, MSNBC, 21 Oct. 2008.
Martin, Jonathan. "Hank Jr. takes to radio to hammer Obama on 'bitter'," Politico, 23 Oct. 2008.
Comments (0)
hank_williams__radio_ad_mccain.mp3
Summary
A conservative group called RightChange.com has spent $3 million running ads that largely
criticize Obama and his tax plans. Theyre false:
Two ads say Obama would tax "small businesses" at a rate of "62 percent." He wouldnt.
That number is an inflated estimate of the very top tax rate, and it doesnt represent what
Obama has proposed.
That false figure includes an increased Social Security tax rate that Obama doesnt
support, plus the state income tax rate paid by people making more than a million dollars
a year in California.
One ad implies that regular folks just trying to make it as entrepreneurs would be hit with
such a rate. But even if this estimate were correct and its not it would affect the
wealthiest taxpayers and only 1 percent of those who could generously be considered
small-business owners.
Analysis
RightChange.com, a 527 group out of North Carolina, is largely bankrolled by its president, Fred
Eshelman, the CEO of a pharmaceutical research firm, who has contributed $2.7 million of the
$3.8 million the group has raised this year. According to OpenSecrets.org, Eshelman has also
contributed $2,300 to Sen. John McCains campaign. Two of the other three members of its
board of directors are GOP state legislators in North Carolina. RightChange.com has spent just
over $3 million so far.
The group has been running ads on national cable networks targeting Sen. Barack Obama,
mainly by calling into question his tax proposals. The ads offer a false picture of how Obamas
plan would affect small businesses.
Click to expand/collapse the full transcript
happen to the top marginal income tax rate of 35 percent under Obama. (Obama says hell raise
that to the pre-Bush-tax-cut level of 39.6 percent.)
Heres the deal on that top marginal rate: In 2008, it will affect those with taxable income (in
other words, net income after deductions) of more than $357,700. (For 2009 income, the cut off
will be $372,950.) About 1 percent of what could generously be considered small-business
owners who file taxes as individuals would be in this tax bracket, according to the Tax Policy
Center. The top marginal rate is only applied to money earned above that level. So, if an
individual has taxable income of $367,700 in 2008, for instance, $10,000 would be taxed at 35
percent. The rest of that persons income is taxed at lower rates.
In order to come up with his inflated figure, Boskin starts with the 39.6 percent top federal
marginal income rate Obama has proposed. He then adds Californias top marginal rate of 10.3
percent, a rate that is now only applied to those who earn more than $1 million a year, and is the
highest of all state income taxes in the U.S. When Boskins op-ed ran in late July, the state
Legislature was debating a controversial hike in some taxes, which would have put a 10 percent
rate on taxable income over $321,000, but that proposal failed. If RightChange.com wanted to
make a truthful ad, it would need to say that its inflated tax rate applies to millionaires living in
California not "many small businesses."
Boskin clearly states that hes talking about the very top marginal rate, but RightChange.com
ignores that. Its ad goes on to claim that small businesses would "keep 38 cents of every dollar,"
which is patently false. Even if businesses were taxed at 62 percent, which none would be under
either presidential candidates plan, they wouldnt face such a rate on "every dollar." This is the
top marginal tax rate that Boskin is analyzing, and as we explained, it would only apply to net
income above $357,700 in 2008. This is the claim that led the Tax Foundations Prante to
question Right Changes motivations or brainpower.
marginal rate on dividends and capital gains, which he calculates to be 58 percent. Both his
calculations are inflated beyond what Obama has proposed, but if RightChange.com wanted to
give an apples-to-apples comparison, it would use Boskins higher number for the corporate rate.
We could go on about other RightChange.com ads, like the one that claims Obamas "retirement
tax" would "punish" seniors even though, as weve said, Obamas proposal to raise the capital
gains and dividend rate would only affect those retirees making more than $200,000 a year (or
$250,000 for a couple). And he proposes eliminating the federal income tax for seniors 65 and
older who earn less than $50,000 a year.
RightChange.com, which calls itself a "nonpartisan" organization, also touts on its home page
the Republicans criticism of Obamas "refundable tax credit" of $500 for workers (or $1,000 for
couples), calling it a "wealth distribution" scheme. It doesnt mention that McCain proposes a
"refundable tax credit" of up to $2,500 ($5,000 for couples) as part of his health care plan.
by Lori Robertson
Sources
Prante, Gerald. Rightchang.com Running False Ads Attacking Obama on Taxes. Tax
Foundation, 29 Sept. 2008.
Boskin, Michael J. Obamanomics Is a Recipe for Recession. Wall Street Journal, 29 July 2008.
Table T08-0164, Distribution of Tax Units with Business Income by Statutory Marginal Tax
Rate. Tax Policy Center, 14 July 2008.
State Individual Income Tax Rates, 2000-2008. Tax Foundation, 3 Feb. 2008.
Furman, Jason and Austan Goolsbee. The Obama Tax Plan. Wall Street Journal, 14 Aug. 2008.
Rau, Jordan. Arnold Schwarzenegger signs $145-billion California budget. Los Angeles
Times, 24 Sept. 2008.
Zapler, Mike. Budget proposal goes nowhere. San Jose Mercury News, 18 Aug. 2008.
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Summary
McCain's new ad claims that Obama "says he'll raise taxes on electricity." That's false. Obama
says no such thing.
McCain relies on a single quote from Obama who once and only once so far as we can find
suggested taxing "dirty energy," including coal and natural gas. That was in response to a
reporter's suggestion that a tax on wind power could fund education. Obama isn't proposing any
new tax on electricity or "dirty energy" as part of his platform, and he never has.
It's true that a coal/gas tax would raise electric rates, but so would a cap-and-trade program to
restrict carbon emissions. Cap-and-trade is an idea that both McCain and Obama support, in
different forms. Neither candidate characterizes cap-and-trade as a "tax."
Analysis
Presumptive Republican presidential nominee John McCain once again goes after Barack
Obama, his Democratic counterpart, in a new television ad titled "Celeb." The ad is airing on a
few national networks and in 11 "key states," according to the campaign.
Click to expand/collapse the full transcript
False Claims 4 U
The ad opens with shots of massive crowds shouting Obama's name. As the female announcer
informs us that "he's the biggest celebrity in the world," the camera cuts to quick images of
Britney Spears and Paris Hilton. The announcer then asks whether Obama is ready to lead before
informing us that Obama opposes offshore drilling and "says he'll raise taxes on electricity." The
cheering crowds are replaced by ominous music as the suddenly serious announcer intones,
"Higher taxes. Foreign Oil. That's the real Obama."
The McCain campaign sent reporters a set of "ad facts" to accompany the new spot. But the
campaign's sole source for its charge that Obama wants to raise taxes on electricity is a short
Feb. 19 interview that Obama gave to Carlos Guerra, a reporter with the San Antonio ExpressNews. Obama does in fact say, "What we ought to tax is dirty energy, like coal and, to a lesser
extent, natural gas." But that quote is out of context. Obama and Guerra are discussing possible
ways to fund education. Here's the pertinent passage, in full:
Guerra: Have you considered other funding sources, say taxing emerging energy forms, for
example, say a penny per kilowatt hour on wind energy?
Obama: Well, thats clean energy, and we want to drive down the cost of that, not raise it. We
need to give them subsidies so they can start developing that. What we ought to tax is dirty
energy, like coal and, to a lesser extent, natural gas.
But I think that the real way to fund education is for local communities to step up and say this is
important to us. There are no shortcuts. When people say they want to fund education with
lotteries, or do this or do that, what they are saying is that this isnt a top priority. It should be a
top priority and people should be saying, we get what we pay for.
As we read Obama's response, he is rejecting a tax on wind energy, saying that taxing "dirty
energy" is a better option, and then he is rejecting both notions by saying "the real way" is for
local communities to "step up" and pay for education with "no shortcuts." Obama's phrasing does
leave room for interpretation, but to our ears this is a feeble peg on which to hang a claim that
Obama wants to "raise taxes on electricity."
We asked the McCain campaign if it had any other information on which to base this "taxes on
electricity" claim, and we received no response. We looked, but could find no instance of Obama
making mention of a tax on electricity or any other reference to a "dirty energy" tax. In any case,
no such policy proposals are currently part of his public platform.
Eric Roston, of the nonpartisan Nicholas Institute for Environmental Policy Solutions, says that
any cap-and-trade program will raise the cost of electricity. As he told FactCheck.org, "The goal
of cap-and-trade is to make fossil fuels more expensive, which will make new technologies
competitive with them." And since Obama would be auctioning credits, Roston says that it's "not
unreasonable" to label Obama's program a tax politically.
Of course, by that standard, John McCain also favors raising taxes on electricity. McCain's Web
site prominently proclaims his support for a cap-and-trade program, and in 2003, McCain and
then-Democrat Joe Lieberman jointly sponsored legislation that would have implemented a capand-trade system.
Toxic Charges
We usually try to avoid writing articles about Hollywood's latest gossip, but in this case, we felt
that the McCain campaign's choice of celebrities is worth a brief mention. In a conference call
with reporters, McCain spokesman Brian Rogers said the ad features Ms. Hilton and Ms. Spears
because, on the listing of "three biggest international celebrities in the world," they rank second
and third. We'll leave it to you to judge how up-to-date the McCain campaign's celebrity meter
is. But we will note that, in a lucky coincidence, Spears and Hilton also topped an AP poll for
"worst celebrity role model." That connection appears to be deliberate. When asked whether the
campaign intended to imply that Obama is as "frivolous and irresponsible" as Spears or Hilton,
Rogers replied, "I think that's exactly what we've been saying."
If McCain's aides believe that Barack Obama is like Britney Spears, that's their prerogative.
- by Joe Miller
Update, July 31: Roston contacted us after the article had been published to clarify that it is
reasonable politically to classify Obama's cap-and-trade proposal as a tax. We understood that
to be his position, but have updated the article to reflect his clarification.
Sources
"The Lexington Project: Breaking Our Dependence on Foreign Oil." 2008. JohnMcCain.com. 30
July 2008.
Associated Press. "Britney Tops Poll of Worst Celebrity Role Models." 28 December 2006.
MSNBC.com. 30 July 2008.
Guerra, Carlos. "Q&A With Sen. Barack Obama." 19 February 2008. The San Antonio NewsExpress. 30 July 2008.
S.139: The Climate Stewardship Act of 2003. 9 January 2003. 30 July 2008.
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