Searching for Obama's 95 Percent By Philip Klein

HEMPSTEAD. N.Y. -- "We are going to cut taxes for 95 percent of Americans," Barack Obama's campaign manager, David Plouffe, said in the spin room here at Hofstra University following the final debate of the 2008 presidential election. Plouffe was repeating one of the boldest claims made by the Obama campaign. It's a claim that the Wall Street Journal editorial board dubbed "Obama's 95% Illusion," noting that more than a third of Americans don't pay any income taxes, and that what Obama's plan does do is offer a raft of subsidies and government payments to individuals and families that he redefines as "tax cuts." His proposal looks more like a redistribution scheme than an honest effort to reduce taxes -- as he revealed on Monday when he told a now famous Ohio plumber that his plan aimed to "spread the wealth around." So when Plouffe reiterated the 95 percent claim, I asked him a simple question aimed at clarifying whether Obama's tax plan was about cutting rates, or merely handing out government checks. "What rates would actually go down"? I asked. "Middle class people are going to see, systemically, their taxes reduced, and small businesses," Plouffe responded. "But what rate would go down for lower-income Americans?" I persisted, seeking more information. "We'll have to get you the exact details on that," Obama's campaign manager told me. I followed up, recapping the claim he had just made moments ago: "Well, you said that there's going to be a tax cut on 95 percent, so what rate would go down?" He replied, "I'll have to get you the exact rate differential." Given that he wasn't clear on the actual rate changes involved, I asked, "but which type of tax would go down?" He insisted that under Obama's plan, income taxes would be lower, as well as capital gains taxes on start up businesses and small entrepreneurs (though the capital gains tax would otherwise increase).

SHORTLY AFTER my exchange with Plouffe, I was listening to David Axelrod, Obama's senior strategist, and I decided to put the question to him slightly differently: "Let's say you're making $50,000 a year," I posited. "What taxes would you see go lower under the Obama plan?" Axelrod replied, "You would get a $500 cut in your taxes. If you're a couple, $1,000." I queried as to whether that money would come in the form of a check, or a lower rate. "You would see a reduction in your taxes, in the taxes that you pay," he insisted. After further questioning, he added, "The mechanism for it has to do with deferring part of the withholding taxes, but you should talk to our budget folks on that." Later in the evening, Brian Deese, an Obama economics adviser, emailed me the following information, at Plouffe's request:

OVERALL IMPACT OF OBAMA TAX PLAN:
- The Obama plan would reduce income tax rates for a typical family of four the lowest level in more than 50 years (4.32%). [Tax Policy Center]- Obama's plan will cut taxes as a share of the economy to 18.2% -- below the level that prevailed under Ronald Reagan. [Tax Policy Center 9/12/08]
I could not find a reference to the first statistic after viewing the study cited by Deese. In its analysis, the Tax Policy Center (a venture of the left-leaning Brookings Institution and Urban Institute), sides with the Obama campaign by categorizing as "tax cuts" government payments such as the $1,000 to couples, $4,000 for college tuition, and 10% payment to offset mortgage interest expenses. But the study does not repeat the Obama campaign's 95 percent claim. (In a late night email, I raised these points with Deese, and also asked him to explain the criteria under which the campaign arrived at the 95 percent number, but did not hear back as of this writing.) In fairness, politicians long ago began to use the tax code as a tool for crafting social policy rather than merely as a way to raise revenue. Republicans and Democrats alike have abused terms such as "tax credit" and "tax rebate" to make their policy goals more palatable. But Obama is getting away with defining tax cuts so broadly, that future candidates will simply claim any form of increased government spending as a tax cut. Under Obama's logic, higher food stamp allowances and expanded state funding of the arts could be dubbed "food tax credit" and "arts tax credit" respectively, and also qualify.If Barack Obama can effectively claim that his plan cuts taxes on 95 percent of Americans, then the term "tax cut" has no meaning.