The 95% Myth
Well, if you paid any attention to the increasingly heated political rhetoric from both parties, you would’ve heard ad infinitum, and justifiably impressed by, Sen. Obama’s “tax cut” for “95% of Americans”. Republicans, predictably, take issues with how the Obama camp define “middle class”, be it income below 65k or 43k.
It might be futile handwringing figuring out whether you fall into the lucky 95% bracket.The Economist provides a handy fact check.
[A]ccording to [Obama's] written plans, he really means 95% of families with children, not 95% of Americans. But his real sleight-of-hand is to count handouts administered through the tax code as “tax cuts”. You might think that a tax cut means keeping more of what you earn. The way Mr Obama uses the phrase, however, it can also mean being given a chunk of money that someone else has earned. That is how he is able to offer “tax cuts” to “95% of Americans” when about a third of American households already pay no federal income tax.
So, how can you “cut” zero, you might ask? Well, It’s called a “refundable tax credit”, or “welfare” as it’s known in the real world. Basically,
It involves the federal government taking money from those who do pay taxes, and writing checks to those who don’t.
