There are a number of points worth addressing in countering the Wall Street Journal oped piece by Martin Feldstein and John Taylor. The most important one is that they rely on the complicated nature of McCain's so called health plan to obfuscate one very salient point: More people will get a tax cut under Obama's plan than McCain's. (I hope this is a clear enough statement for Krugman)
First, its important to note that despite their misleading rhetoric, even Feldstein and Taylor acknowledge that 95% of families will see tax relief under Obama's plan:
Mr. Obama's claim to being a big tax cutter defies credibility. His assertion that he would cut taxes on 95% of families reflects his one-time $1,000 rebate payouts, and a variety of new government spending handed out through the tax system.Those two sentences do not in any way diminish Obama's claim --95% of families affected by these tax policies will pay lower taxes. You can try to call tax cuts for a particular purpose that you don't like, "government spending", but that doesn't make it so. By that logic, McCain's corporate tax cuts or investment credits or changes in personal exemptions are also government spending. Its somewhat painful to see such two highly distinguished economists having to resort to verbal gymnastics to try to counter a basic factual claim.
They then try to refute Obama's claim that McCain offers no tax cuts for 100 million families:
Mr. Obama also criticized Mr. McCain on the grounds that he doesn't cut taxes on 100 million families. But this ignores the fact that Mr. McCain's health-insurance credits would benefit most taxpayers and that many people who are not currently eligible for the increased personal exemption will become eligible when they have children. When these features are taken into account, the vast majority of today's 140 million taxpayers would pay lower taxes under the McCain plan.Lets take that apart. First note that they essentially acknowledge Obama's claim has some merit but argue that it doesn't include two offsetting factors. The first is a claim that the health insurance credit McCain institutes will more than offset the increased income tax that is part of McCain's health plan (this is due to the fact that employee spending on health insurance will no longer be tax exempt).
What they completely ignore is that the whole point of the health plan is to shift health spending away from an employer based system. That is, once they remove the tax benefits of employer provided health insurance, they are actively encouraging employers to drop insurance coverage. (Note that they like to talk about incentives but only when it suits their argument). For those individuals who lose employer coverage (the purpose of the plan --see Don Pedro's post) it is not at all clear that they will pay lower taxes. It is only those who maintain employer coverage who may see a net benefit. So, how many people will lose coverage and how many will see a net tax benefit? No one knows because it is a very complicated question (see this post by Henry Aaron of Brookings). Note, Feldstein and Taylor do not provide an estimate of these numbers. Once they provide a number (and the basis for the calculations) then one can engage in a reasonable argument about the parameters. Until then the burden of proof is on them to calculate the numbers on how many will actually see reduced tax payments. In doing so, they'll be caught in a bind, because they will be forced to uncloak the point of their plan, which is to eliminate employer-based coverage.
The second claim, that some couples will soon have kids and then become eligible for McCain's increased personal exemption is kind of silly. Basically, they are ignoring that other families will no longer be eligible once they become empty nesters. I think here they are grasping at straws. This is buttressed by the fact that they provide no numbers but simply claim that "the vast majority" will see tax declines. If they could reasonably claim more would get a tax cut under their plan than under Obama's they would say that loud and clear --but they can't!
Bottom line: More families get a tax cut under Obama than McCain. Also see Jonah's great post which shows visually, exactly who will benefit from each tax plan.