Obama's middle-class tax cuts
Posted: Tuesday, September 18, 2007 4:07 PM by Mark Murray
From NBC's Andy Merten and NBC/NJ's Aswini Anburajan
A day after calling for greater transparency on Wall Street, Obama focused on middle-class tax relief while speaking today to an intimate gathering of about 100 guests in a hotel conference room in DC.
Beginning the speech by telling the story of his father-in-law, who was able to support his family despite the burdens of overt racism and the obstacle of suffering from multiple sclerosis, Obama spoke of a “basic social compact” that says, “If you work hard, your work will be rewarded.” He continued by lamenting, “That social compact is starting to crumble and erode... This isn’t the invisible hand of the market at work. It’s the successful work of special interests.”
The Illinois senator’s plan to “relieve the burden of the middle class” includes four points: 1) an income tax cut of $500 per person (or $1,000 per working family) for 150 million Americans; 2) a universal mortgage interest credit of 10% for homeowners who make under $50,000 a year; 3) the elimination of income tax for retirees making less than $50,000 a year; and 4) simplifying the process of filing a tax return.
How would Obama pay for these tax cuts? Obama plans to eliminate the carried interest loopholes that benefits hedge funds and adjust the top dividends and capital gains rate between 20% and 28%. The campaign also claims that aggressively seeking out international tax shelters, challenging existing loopholes, and requiring countries that harbor tax havens to be open about who is investing in them would allow the IRS to reap the $85 billion in lost revenue back.
Another question that remains unanswered by the Obama tax plan is the Alternative Minimum Tax (AMT), which penalizes many middle-class taxpayers. Congress has traditionally expanded the exemptions under the AMT on a year to year basis, with only 3.5 million Americans qualifying to pay the tax last year. If congress doesn't act to renew the exemption this year, the AMT would affect 23 to 24 million Americans, according to the Urban Institute.
Reporters today badgered Obama's senior economic policy adviser on the AMT question, but were told that this proposal was done without regard to that tax. But if the goal of an Obama policy proposal is to simplify the tax code, leaving the AMT untouched could prove to be problematic.
