WASHINGTON -- White House hopeful Sen. Barack Obama (D-Ill.) unveiled a tax cut plan tailored to millions of seniors and middle-class adults with mortgages Tuesday, a few hours later firing up an after-work young professional crowd at a downtown outdoor rally here.
"For decades, we've seen a successful strategy to ride anti-tax sentiment in this country toward tax cuts that favor wealth, not work," Obama said in a speech to theUrban- Brookings Tax Policy Center.
» Click to enlarge image Democratic presidential hopeful, Sen. Barack Obama, D-Ill., delivers remarks on tax relief for the middle class at an event hosted by the Tax Policy Center and the Brookings Opportunity '08 Project in Washington Tuesday.
Obama proposes redistributing the overall income tax burden in part by closing down legal and illegal corporate and hedge fund tax avoidance schemes and hiking taxes on capital gains and dividends. He would use some of that money to reduce taxes for millions of taxpayers. Obama's team said the cuts would total $80 billion to $85 billion but did not provide details on where the revenue would come from beyond several broad proposals.
Still, the package of ideas gives insight into Obama's thinking when it comes to the issue of income tax equity and taxation on investments. "We want a system based on fairness," Obama said, "not special favors."
The most populist plan Obama put on the table is an elimination of all income taxes for seniors over 65 with taxable income below $50,000 per year.
For taxpayers with a simple financial life -- just a salary and investments -- Obama proposed having the IRS in effect calculate the return and send it along for a signature. Filing a return will take "less than five minutes," Obama said.
Taxpayers with mortgages are allowed to deduct interest -- if they itemize returns, which often triggers having to hire a tax professional. An Obama adviser said almost half of all homeowners, most with lower incomes, don't use the tax break. The Obama remedy is to give a mortgage tax credit of up to $500 for low-income homeowners who don't itemize.
Obama's biggest item is a proposed new tax credit, aimed at the very low income, to get back up to $500 per person or $1,000 per family paid through Social Security payroll tax deductions.
Obama, like most Democrats, favors ending President Bush's income tax breaks for the wealthy. Last May, Obama said he would use the money to pay for his health care plan. On Tuesday, Obama's adviser said higher investment taxes would yield enough money to pay for the health care plan and an unspecified amount of the tax cut.
Rival former Sen. John Edwards (D-N.C.) offered his middle-class income tax cut package in July. Edwards spokesman Eric Schultz said in a statement, "We also think when it comes to selecting a president, specifics matter, and we look forward to seeing what tax rates Sen. Obama proposes." The campaign of Sen. Hillary Rodham Clinton (D-N.Y.) had no comment.
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