One key campaign theme for Barack Hussein Obama the masterful is he will cut taxes for 95% of Americans or “working families.” Mr. Obama must have consulted Al Gore to receive a lesson in fuzzy math. “The One” isn’t advertising he will provide for the largest tax increase on 5% of Americans in US history as well as other nefarious tax “gifts.”

Fact: One-third of all Americans do not pay taxes.

Fact: For Obama a tax cut includes tens of billions of dollars in government handouts that are disguised by the phrase “tax credit.”

- A $500 tax credit ($1,000 a couple) to “make work pay” that phases out at income of $75,000 for individuals and $150,000 per couple.

- A $4,000 tax credit for college tuition.

- A 10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).

- A “savings” tax credit of 50% up to $1,000.

- An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.

- A child care credit of 50% up to $6,000 of expenses a year.

- A “clean car” tax credit of up to $7,000 on the purchase of certain vehicles.

The credits are “refundable”, which means an individual would receive government checks even if they have no tax liability. This is called an “income transfer” or “income redistribution” when money is given to non-taxpayers by taxpayers. It’s not lower taxes.

The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation’s Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.

Obama’s give-and-take tax policy results in marginal tax rates of 34 percent to 39 percent in the $31,000 to $45,000 income range for a family. That’s an increase of 13 percentage points or more from the current rates. This is a tax on middle class income.

Obama has publicly embraced a tax rate of 40 percent for couples earning over $350,000, his tax policies would result in a staggering 45 percent effective marginal rate in the $110,000 to $120,000 income range for this family. That is 11 percentage points higher than the current law.  That is 11 percentage points higher than under current law. 

Obama’s has proposed reform of the Hope Scholarship Tax Credit for college tuition, which he would rename the “American Opportunity Tax Credit.” He would increase the credit’s maximum value from $1,800 to $4,000 while still phasing out the credit over the same income range, $100,000 to $120,000. The larger phase-out would boost the penalty on work from 9 percentage points to 20 percentage points. 

There’s another catch: Because Mr. Obama’s tax credits are phased out as incomes rise, they impose a huge “marginal” tax rate increase on low-income workers. The marginal tax rate refers to the rate on the next dollar of income earned. As the nearby chart illustrates, the marginal rate for millions of low- and middle-income workers would spike as they earn more income.

Some families with an income of $40,000 could lose up to 40 cents in vanishing credits for every additional dollar earned from working overtime or taking a new job. As public policy, this is contradictory. The tax credits are sold in the name of “making work pay,” but in practice they can be a disincentive to working harder, especially if you’re a lower-income couple getting raises of $1,000 or $2,000 a year.

Senator Obama’s proposed “tax cuts for the middle class” are actually marginal rate hikes in disguise, an illusion not a solution. Certainly the Obama plan is not the tax cut he promises on a daily basis. Indeed!

Sources: Wall Street Journal, The American