When the government gives out money, it is spending. Tax credits are government expenditures run through the tax system; your income collected is then given back to people on their taxes who meet a criteria. Simply having the IRS write the check (instead of a department such as Health and Human Services), allows the government to classify it a cut instead of spending. The “Making Work Pay Credit” cited in Kessler’s piece is a perfect example of what is not a tax cut – this is a government handout. Others include Cash for Clunkers , Energy Credits, and First Time Home Buyer Credits. Instead of doing the honorable thing and using the Treasury to send the money to each eligible taxpayer, the administration instead ran the disbursements through the IRS so they could claim a “tax cut”. This same type of deceit put Enron executives behind bars. Clearly there was nothing resembling a marginal rate tax cut that would be valuable to the economy .
This past week, the Washington Post provided a sliver of clarity when Glen Kessler, “The Fact Checker” , exposed Obama’s dubious tax cut claims. While he should be commended for issuing four pinocchios for Obama’s untruths, he completely missed the biggest lie of them all. What Obama (and Mr. Kessler) call tax cuts are not. As a lifelong CPA, I can assure you that tax cuts are a specific term, meaning cuts to the marginal tax rate. The package that Obama passed after he took office contained virtually none of those.
This new jobs bill (that we haven’t seen yet) contains more of the same tax cuts deceptive language, fuzzy math, and worthless programs. Mr. Kessler’s assessment of Obama’s nonsense was a welcome contribution to economic debate, but the confusing rhetoric weakened his argument. The biggest whopper — Obama’s claim of tax cuts that aren’t– deserved a fifth Pinocchio.