Obama plan: tax cuts or Demogrants?

(By Ed Morrissey, Hot Air) - Given Barack Obama’s relentless populism this cycle, the Wall Street Journal analysis of his tax cuts should surprise no one. They find that Obama relies less on actual cuts in tax rates and more in specific “refundables”, grants that filers receive whether they have a tax liability or not. Instead of reducing taxes, Obama makes his redistributionism explicit:

One of Barack Obama’s most potent campaign claims is that he’ll cut taxes for no less than 95% of “working families.” He’s even promising to cut taxes enough that the government’s tax share of GDP will be no more than 18.2% — which is lower than it is today.

It’s a clever pitch, because it lets him pose as a middle-class tax cutter while disguising that he’s also proposing one of the largest tax increases ever on the other 5%. But how does he conjure this miracle, especially since more than a third of all Americans already pay no income taxes at all? There are several sleights of hand, but the most creative is to redefine the meaning of “tax cut.”

For the Obama Democrats, a tax cut is no longer letting you keep more of what you earn. In their lexicon, a tax cut includes tens of billions of dollars in government handouts that are disguised by the phrase “tax credit.” Mr. Obama is proposing to create or expand no fewer than seven such credits for individuals[.]

Six of the seven listed in the Obama plan are these “refundables”, money people get from the federal government even if they pay no taxes at all. These are not “tax cuts” but instead welfare grants based on specific social policy. It’s blatant redistributionism, as the money comes from tax increases on the wealthy.

Real tax cutters use that policy as a way to restrain growth in federal government, although the Republicans certainly forgot the other part of that equation for six years — cut spending. Obama’s plan actually makes people more dependent on federal government, and expands it significantly. It adds to the entitlement mentality while doing nothing about rewarding risk. This plan will penalize risk and encourage the wealthy to find even more shelters for their income and capital, more likely outside the US, which will mean fewer jobs and fewer opportunities.

The last thing this economy needs is a flight of capital. We need that money invested in America to create jobs, not hidden away from an aggressively redistributionist federal government. We should be reducing taxes, but not giving more money to people who don’t pay any at all.