McCain on taxes, cont’d

I’ve had a lot of emails about my piece on McCain’s failure to sell his main tax proposal–the refundable credit for health insurance. The article explained how the credit would leave most middle-income Americans paying less tax than under Obama’s plans. As it happens, taken together, I prefer Obama’s tax and health-care proposals to McCain’s: I think McCain’s health credit is good as far as it goes, but it does not go nearly far enough. Obama’s plan would expand coverage much more, and it seems to me that this should be a key goal. However, the fact remains that McCain’s plan would put more disposable income (net of taxes and health-care outlays) in the pockets of most middle-income voters.

Well, you would not guess this from the way the McCain campaign has dealt with the issue. Joe the Plumber and the preoccupation with Obama’s thinking on redistribution has clouded what surely ought to have been the main thing, from a tactical point of view. Anyway, as many have pointed out, we are all redistributionists in principle. Republicans too believe in spreading the wealth around. Is McCain planning to abolish the earned-income tax credit? Is he proposing a flat-rate income tax with no exemptions? It is a question of how far, not whether.

Many of the emails I received began, “You are just wrong,” and came from accounting firms, lawyers, and academics of one sort or another. I was initially disconcerted. What had I missed, I wondered? But no, it turns out, my correspondents had simply misunderstood McCain’s proposal in one way or another–and I don’t blame them for having done so. He is offering a refundable tax credit, not an ordinary credit (which can only be set against taxes owed) and not a deduction in taxable income (which would provide a much smaller tax saving); this credit would also be paid to people with employer-provided health insurance, not just to people who buy their own; and the existing payroll-tax exemption for health insurance would continue under the McCain plan (if this were abolished too, his plan would cut disposable income rather than increase it for many households). These were the most popular reasons for believing I was mistaken, and for maintaining that the Obama proposals would give middle-income households a bigger overall tax cut. Even sophisticated voters have failed to get the message: McCain is offering middle-income American a bigger tax cut than Obama.

Am I naive to suppose that this would have been a stronger selling-point than Joe the Plumber? Wouldn’t it have been a good idea to make sure this was understood?

Clive Crook’s blog

This blog is no longer updated but it remains open as an archive.

I have been the FT's Washington columnist since April 2007. I moved from Britain to the US in 2005 to write for the Atlantic Monthly and the National Journal after 20 years working at the Economist, most recently as deputy editor. I write mainly about the intersection of politics and economics.

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