McCain also proposes a tax credit of $5,000 per family and $2,500 per single worker for purchasing health insurance. This is a huge tax cut for the middle class, $1.3 trillion over 10 years. As Scott Hodge of the Tax Foundation says, “This tax provision has a bigger impact on cutting people’s taxes than any single proposal from either party.”

McCain proposes as well to eliminate a huge pending tax increase for the middle class under current law by abolishing the Alternative Minimum Tax (AMT). The AMT is slated to grow to impose a trillion dollar increase on the American people in future years, burdening 25 million middle class families. Abolishing the AMT would save middle class families a pending tax increase of $2,700 on average per year, another middle class tax cut of $60 billion each year from current law.

Most importantly of all, McCain’s tax plan also includes pro-growth tax cuts that provide exactly the shot in the arm the economy needs right now, exactly the opposite of Obama’s tax plan. The reduction in the federal corporate tax rate from 35% to 25% is a marginal tax rate reduction which would probably not lose any significant revenue overall on net because American companies are so stymied now by the uncompetitive 35% rate. McCain would also make the Bush tax cuts permanent, which would keep income tax rates, capital gains tax rates, and dividend tax rates from rising, and he would still vastly reduce the death tax from its pre-Bush levels. He would also reduce taxes on savings and investment through expensing of capital investment. Abolishing the AMT is another pro-growth tax cut that would prevent additional marginal tax rate increases.

These pro-growth tax cuts would do far more for the middle class and working people than a $500 per worker tax credit. They would reverse the current economic downturn, restoring economic growth, creating jobs, and reviving income and wage growth. They would “spread the wealth around” by creating prosperity for working people and the middle class, not by stealing from those who have already produced their own wealth.

Obama’s New Tax Welfare

The top 1% of income earners now pay 40% of all federal income taxes, almost twice their share of national income. The top 20% pay 86%. Clearly, federal income taxes are now paid primarily by these upper income taxpayers.

The bottom 40% of income earners as a group pay no federal income taxes on net. Instead they actually receive payments from the income tax system equal to 3.8% of all federal taxes paid. The middle 20% of income earners, the true middle class, pays 4.7% of all federal income taxes.

This is the result of Reagan Republican supply side economics that began with Reagan and Jack Kemp in the 1970s and 1980s, through Newt Gingrich and his Contract with America, to the Bush tax cuts of 2001 and 2003. Reagan and his Republicans have abolished federal income taxes on the working class. Moreover, they have almost abolished federal income taxes on the actual middle class (the middle 20%). Indeed, the tax cuts proposed by McCain would probably eliminate most of the remaining tax liability of the middle class.

When Obama insists that he wants all of his tax increases for upper income workers because of fairness, he is reflecting the ignorance of his own left wing extremism, and of the left wing nutcase base to which he is appealing. If the top 1% is already paying 40% of federal income taxes, and the top 20% are already paying almost of all of them, how is increasing their tax burdens further promoting fairness?

Moreover, Obama cannot cut federal income taxes for working people and the middle class where Reagan and his Republicans have already eliminated federal income taxes for them.

Nevertheless, besides his $500 per worker tax credit, Obama proposes a slew of additional refundable income tax credits targeted towards low and moderate income people, precisely those who pay little or no federal income taxes now. The term “refundable” means that if the worker does not have enough tax liability to take advantage of the credit, the government sends the worker a check to cover the full amount of the credit anyway. Obama proposes such tax credits for child care, education, housing, retirement, health care, welfare, and other giveaways.

Such credits would primarily not reduce tax liability, but, rather, would primarily involve checks from the federal government for these purposes. Consequently, they are not tax cuts. They are new federal spending programs hidden in the tax code. This is why I call it The New Tax Welfare. These new tax welfare programs alone would cost an additional $1.3 trillion over 10 years.

The Obama campaign is dishonest when it says these credits somehow offset payroll taxes. None of these credits, including the $500 per worker credit, involve any reduction in payroll taxes. They are refundable income tax credits, not payroll tax cuts. If Obama wants to reduce payroll taxes, let him propose an actual payroll tax cut, and then explain to the country how we are going to finance Social Security benefits.

Such cash grant tax credits again would do nothing to help the economy. Indeed, they would hurt the economy because the credits are again phased out as income grows into and beyond the middle class, actually effectively raising marginal tax rates for these middle class and upper middle class taxpayers.

The Obama tax plan is consequently precisely the opposite of tax reform. Instead of closing loopholes and lowering rates, he is creating new loopholes and raising the rates. Raising the top marginal tax rates for every major federal tax, and adopting $1.3 trillion in new tax welfare tax credits, could not be dumber, more counterproductive, anti-growth tax policy. This is not going to benefit 95% of Americans. It is going to leave all Americans poorer and worse off.