I tried to find a link to this information on the Obamessiah’s website, but only found light and fluffy overviews, short on specifics.

Yesterday, I heard Shepard Smith at Fox News talking to a representative of the Obama Campaign about this (can’t find a video of the discussion), and went out looking for some detail…

Senator Obama is constantly talking up his plan to give 95% of Americans a tax cut. Since a large percentage of Americans pay no income tax, at the end of the day, how can that be true?

The dirty little secret is this: When Obama talks about “Taxes”, he is not only talking about Income Taxes, but also Payroll Taxes. The Obama plan would give a credit for Payroll Taxes ($500 per person/$1000 per couple, for folks making over $8K/yr, 100% under that) to everyone who makes under a specific amount (I believe the number is $200K, but I would welcome confirmation or correction on that).

Using this definition, people with NO income tax liability will still be eligible for a credit for Payroll Taxes that they have paid in. So, if you use the Obama definition, yes, they are giving a “tax cut” to 95% percent of Americans.

Background: for those that are unaware, Payroll Taxes are contributions to Social Security and Medicare. The level of contribution varies by gross pay, from 6.2% up to 12.4% at the current Cap ($102K, beyond which the worker has no further contribution assessed).

The major problem with this is that to pay for this credit, Obama would increase the federal deficit (and thereby the debt) by around $728B over 10 years. This number assumes that the credit phases out for workers earning over $75K/yr.

From the information I can find, this proposal is not related to Obama’s Social Security proposals. More on those soon.

Tags: Obama, Payroll Tax, Social Security