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Obama's Redistribution Plan a Taxing Fantasy

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

WASHINGTON -- Joseph Biden recently blew the whistle on Barack Obama's specious claims that he would cut income taxes for 95 percent of Americans by raising them for people earning more than $250,000.

The Obama's gaffe-prone running mate, who has become the loose cannon of his campaign, said in an unscripted interview with a TV station in Scranton that the real soak-the-rich tax threshold in Obama's plan would start with incomes at $150,000.

Biden later tried to revise his remarks by saying that anyone earning between $150,000 and $250,000 wouldn't get a tax cut but their tax rates wouldn't rise, either. Sure. Or as Sarah Palin would say with a wink and a nod, "You betcha."

But Obama's draconian income-tax rate on the top 5 percent of income earners would not produce nearly enough federal revenue to pay for his so-called "tax cuts" for 95 percent of the nation's taxpayers and the rest of his social-welfare spending.

"Those 5 percent don't make enough money, or at least they won't after they find ways to shelter more of their income when their tax rates rise," the Wall Street Journal editorialized Wednesday.

Biden was revealing what has long been suspected among economic analysts who have crunched the numbers on his income transfer tax plan. Obama's tax-the-rich plan to send checks to the 47 million lower-income tax filers who pay no income taxes belies his specious 95 percent claim, since he does not cut their income tax rates.

Biden's uncontrolled bout of candor pokes one more hole in Obama's tax plan to expand the number of working Americans who pay no income taxes to nearly 50 million. Indeed, his campaign Web site boasts that his income-redistribution plan would wipe another 10 million people off the tax rolls.

It also exposed one more claim in a long line of falsehoods the Obama campaign has told about his shifting tax scheme. An Obama TV ad running in battleground states says, for example, that his plan has won support from the Heritage Foundation, a conservative think tank, when nothing could be further from the truth.

On the contrary, a recent analysis by the foundation's Center for Data Analysis concludes that John McCain's economic recovery plan would stimulate more economic growth than the Obama plan. Among its chief findings:

-- Job growth over 10 years is more than twice as high under McCain's tax plan than Obama's.

-- Total employment grows an average of 915,800 jobs under Obama, and by 2.13 million under McCain.

-- Economic growth, as measured by the country's gross domestic product, would be "nearly three times higher than under Obama."

-- A typical family of four "would see an average of $5,138 more in disposable income under McCain plans compared with $3,631 more under Obama's."

A strategic weakness in Obama's income-redistribution plan stems from his decision to give low- to middle-income taxpayers a refundable tax credit, instead of cutting their tax rates, said Heritage analyst William Beach, who led the study.

"Because Sen. Obama relies largely on tax credits to achieve his redistribution, his plan does not find a large economic benefit from lower tax rates, nor a more efficient tax structure," Beach wrote.

"This lower economic performance stems in large part from the modest decreases in marginal tax rates on taxpayers earning less than $250,000 and increases in those rates above that level," he said.

Obama has sold his plan as something it is not: a plan that will grow the economy when, in fact, it would grow the government at the economy's expense.

At the core of his plan is the belief that renewed growth depends first and foremost on income transfers to low- and middle-income people and a mountain of "infrastructure" spending on roads, bridges and other public-works projects, and grants to state governments to spend as they please.

McCain's plan is rooted in the belief that economic growth, job creation and higher incomes can only be fueled by lower tax rates to stimulate business expansion, entrepreneurial risk-taking and capital investment that will grow the economy, not the government.

Even Democrats, some of whom are now advising Obama, have raised questions about his pump-priming infrastructure spending and his rigid opposition to McCain's proposal to cut the 35 percent corporate income tax.

"It's going to be very hard to compete for jobs if we keep high corporate tax rates," David Rothkopf, a trade official in the Clinton administration, told the Washington Post last week.

Notably, two other economists in Clinton's administration wrote earlier this year that spending on infrastructure, as Obama proposes, is among the "less effective options" to combat looming recessions because the money usually trickles down into the economy when it is too late to do any good.

The authors of that study: Douglas W. Elmendorf, now an adviser to House Democrats, and Jason Furman, who is Obama's chief economic adviser.

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