Deceptive tax talk from Edwards
John Edwards delivered another of his populist speeches the other day in Iowa, where he promised major tax cuts for the middle class and increases in health-care spending while providing little evidence that he will have the funds to pay for them. His promises have become so egregious that Robert McIntyre, the director of the labor-backed Citizens for Tax Justice, who is sympathetic with Mr. Edwards’ intentions, told the New York Times that Mr. Edwards is being “very deceptive.”
Since recapturing power in Congress, Democrats have committed themselves, rhetorically at least, to pursue pay-asyou-go policies, which would finance entitlement-spending increases, the ex- tension of middle-class tax cuts and continued relief from the alternative minimum tax (AMT) with offsetting entitlement savings and/or tax increases elsewhere. Based on his proposals, Mr. Edwards clearly does not share this philosophy.
For months, Mr. Edwards has pledged to eliminate the 2001 and 2003 tax cuts for families earning more than $200,000 per year, while extending President Bush’s tax cuts for families earning less than $200,000. For families with incomes above $250,000, he would raise the capital-gains tax rate to 28 percent, which would be 8 points above the pre-2003 level of 20 percent and identical to the top cap-gains rate following Ronald Reagan’s tax-reform agenda in 1986. He also pledged three new tax breaks for the middle class: a tax credit of up to $500 to match savings by families earning less than $75,000; an increase in the child-care tax credit, which would be partially refundable, to pay for 50 percent of childcare expenses up to $5,000; an expansion of the earned-income tax credit for working families and a tripling of it for single adults.
“All of the steps I have proposed,” Mr. Edwards asserted, “will raise well over $50 billion a year to be reinvested in health care, education and other critical priorities.” He has proposed a universal health care plan that he says would cost $90 billion to $120 billion per year, which, by itself, is well above the rise in revenues he projects from his tax increases. But Mr. Edwards has made no provision for extending the tax cuts for families earning less than $200,000, which Mr. McIntyre reckons would cost about $85 billion per year. Nor has he set aside any money to address the AMT, which threatens to increase the income taxes for tens of millions of middle- and upper-middle-class families, especially if the Bush tax cuts are extended for families earning less than $200,000 per year. Protecting these families from the AMT by indexing it for inflation would cost nearly $700 billion over 10 years. Mr. Edwards fails to account for the costs of fixing the AMT. As Mr. McIntyre would say, “very deceptive,” indeed.