Below are the top five tax lies Obama told during the first presidential debate of 2012:
1. Obama: “Governor Romney's central economic plan calls for a $5 trillion tax cut.”
The Romney plan is tax-revenue neutral, not a tax cut. Governor Romney has made it clear that he wants to do revenue-neutral tax reform (lower rates, but the same amount of money collected as an unreformed system would generate). Romney will have a tax reform revenue target of 18-19 percent of GDP, the historical revenue average.
The Romney plan is a classic example of tax reform. He wants to cut each individual marginal income tax rate by 20 percent. In order to pay for this rate reduction, he would take away deductions and credits from high income households. Thus, the plan is a tax cut for the middle class (who will see their rate fall, and their deductions remain unchanged).
Current Tax Brackets
Romney Tax Brackets
2. Obama: Under Romney’s plan, “The average middle-class family with children would pay about $2,000 more.”
The Romney plan will cut taxes for lower and middle-income households. The lowest rate will drop from 10 to 8 percent. The 15 percent rate (which most middle income families face at the margin) will drop from 15 to 12 percent. Furthermore, Romney will repeal Obamacare, including the 20 new or higher taxes in that law. No fewer than seven Obamacare tax hikes fall directly on middle class families, and many more will raise costs indirectly for these families.
Obama has clearly broken his 2008 “firm pledge” not to sign “any form of tax increase” on families making less than $250,000.
Of recent note, Obama has altered his tax pledge: In a second term, he only promises not to raise income taxes on those making less than $250,000, and only for one year. After the one year has come and gone, all taxes are fair game, and at any income level.
3. Obama: “I also lowered taxes for small businesses 18 times. And what I want to do is continue the tax rates — the tax cuts that we put into place for small businesses and families.”
The President’s plan to raise the top two marginal income tax rates will not just affect high-income families. Because small businesses pay taxes using the individual rates, a hike in these rates is a hike in the small business tax rate. According to IRS data, a majority of small business profits face taxation in the top two brackets.
Romney cited a study which shows that a majority of everyone in America who works for a small business works for one that will see its tax rate rise under the President’s plan. A recent study by Ernst and Young projects that this tax hike will kill over 700,000 small employer jobs. The study shouldn’t come as a surprise, as higher taxes on businesses often means layoffs.
The principal tax cut for small business that President Obama is bragging about is a small employer tax credit to purchase health insurance. The only problem is that this tax credit is so complicated to comply with, very few small employers are actually using it. The IRS and HHS practically have to beg employers to even take a look at it. According to CBO, their estimated score for this tax provision is half of what they originally thought it would be, or $20 billion over the next decade. Meanwhile, even this small amount is dwarfed by the rate hike small employers will face under the President’s plan.
4. Obama: “The oil industry gets $4 billion a year in corporate welfare. Basically, they get deductions that those small businesses that Governor Romney refers to, they don't get.”
President Obama speaks of these tax deductions as if they are exclusively employed by energy companies. In fact, cost recovery deductions are available to all industries.
After an oil and natural gas producer spends millions of dollars developing a well, they are allowed to deduct many of the costs associated with this construction project. Obama is unintentionally accurate when he says that oil companies “get deductions that small businesses…don’t get.” Oil companies, in fact, get inferior deductions. For example, according to Sec. 199 of the IRS code, every domestic manufacturer can deduct 9 percent of all qualifying income from their end of year profits—except oil and natural gas companies, which must claim this deduction at the politically-motivated rate of 6 percent. After forcing the oil and natural gas industry to claim a smaller deduction, Obama now argues for total repeal of Sec. 199 for oil and natural gas producers.
An increase in taxes like Obama is calling for could result in 48,000 jobs lost, and 700,000 barrel's worth of oil and natural gas per day, and $29 billion less in government revenue - all by 2020, according to a study by Wood Mackenzie.
5. Obama: “Governor Romney and I both agree that our corporate tax rate is too high. So I want to lower it, particularly for manufacturing, taking it down to 25 percent.”
Obama: “I have said that for incomes over $250,000 a year that we should go back to the rates that we had when Bill Clinton was president.”
Obama claims to be for corporate tax reform, but it isn’t in his budget. His administration released a plan in the spring, but he hadn’t said a word about it until last night.
Even that plan would have been a net corporate income tax hike of hundreds of billions of dollars. With a federal rate of 28 percent, the U.S. would still have a higher corporate tax rate than major trading partners Canada, the United Kingdom, Germany, and Mexico. It would be higher than the OECD (developed nation) average of 25 percent.
Furthermore, Obama has already signed into law tax hikes on corporate shareholders. This disproves his claim that he wants to bring tax rates where they were under the Clinton Administration:
The tax on corporate owners is a second bite at the apple of corporate profits, and Obama signed these rate hikes into law when he signed Obamacare. The capital gains and dividends rate hike will hit middle class savings hard by lowering stock prices, impacting everyone’s 401(k) and IRA.
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