What About Those Obama Tax Cuts?

Obama, speaking Thursday night at a Democratic fundraiser in Miami, told supporters he is amused by the protesters' complaints about taxes because, contrary to their claims, he's cut taxes. "You would think they'd be saying thank you," the president said.

President Obama's record on taxes is mixed. On the stump he promised that "no family making less than $250,000 will see any form of tax increase.". The Obameter, run by the non-partisan PolitiFact, rates this as a broken promise. Taxes have already been raised on cigarettes and new taxes on medical devices, high-quality insurance coverage, and tanning beds are part of the recently passed health care reform package. Still, he did cut payroll taxes through the "Making Work Pay Act" which was part of the general stimulus. So why doesn't Obama get credit as a tax cutter?

First, there is the obvious - you can't raise taxes enough to cover a trillion dollar new program and claim that you are a tax cutter.

Then there is the tax cut itself and the way it was implemented. The Obama administration is a big fan of Nudge which holds that government can make major changes in behavior through small changes. Part of this says that spreading tax cuts across every paycheck is more effective in getting people to spend more than giving them a lump sum. Obama's tax cut was a credit of $250. This amounts to $5 in a weekly paycheck and $10 in a bi-weekly check. These amounts are small enough to be missed, especially if your hours or benefits have been cut.

In addition to wanting to "nudge" people, Obama also has an aversion to wealth so the tax credit starts cutting off for individuals making more than $75,000. A lot of the Tea Party protesters are older and more affluent so they may have never seen the Obama tax cut. To them, Obama was engaging in income redistribution rather than cutting taxes, especially when he has raised taxes elsewhere. That's what happens when you selectively cut taxes. The people who didn't qualify feel slighted.

It is only fair that Obama has gotten so little credit for his tax cuts. President (W) Bush's tax cuts benefited everyone and raised the number of people who did not owe any income tax but Obama consistently refers to this as "Bush's tax cuts for the rich".