October 25th, 2008
08:00 PM ET
11 years ago

Fact check: Would Obama's tax rates be less than Reagan's?

The Statement: Speaking at a campaign event Saturday, Oct. 25, in Reno, Nevada, Democratic presidential candidate Sen. Barack Obama described elements of his tax plan and said, "Under my plan tax rates will actually be less than they were under Ronald Reagan." He made the same statement earlier in the week at campaign events in Richmond, Virginia, and Miami and Tampa, Florida.

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The Facts: Brian Deese, deputy economic policy director of the Obama campaign, said the statement refers to two tax rates: individual income tax rates for middle-income taxpayers, and capital gains tax for families earning more than $250,000.

Deese said the campaign projects that under Obama a median-income family of four will pay an annual effective income tax rate of 4.32 percent. That number, Deese said, comes from the campaign's calculations based on projections in the nonpartisan Tax Policy Center's analysis of the candidates' tax plans.

According to Tax Policy Center historical data, a rate of 4.32 would be lower than during the Reagan years, when average rates for a median-income family of four ranged from 11.79 in 1981 to 9.30 in 1988. By comparison, rates during the Bush administration have ranged from 6.71 percent in 2001 to 5.91 last year.

"Given that they (the Obama campaign) are starting with an already-low level from the Bush tax cuts, and then layering more cuts on, that rate (4.32 percent) is not an unreasonable projection," said Roberton Williams, Tax Policy Center principal research associate. Williams said the question is how many specific individuals would qualify for all the specific cuts under Obama to get to that lowest rate. "That's an unknown at this point," Williams said.

Deese also cites Obama's proposed capital gains rate of 20 percent for families earning over $250,000. That would be lower than the 28 percent capital gains rate Reagan signed into law in 1986. Currently the top capital gains rate for taxpayers in that income group is 15 percent, according to Williams of the Tax Policy Center.

On his Web site, Obama says his "tax relief for middle-class families is larger than the revenue raised by ... tax changes for families over $250,000." Spending cuts including ending the war in Iraq will make up the difference, according to the site.

The Verdict: Misleading. While Obama says that his tax rates will be lower than under Reagan, according to his economic adviser he is referring to specific rates out of the many rates in the tax system. Also, it is not clear how many taxpayers would qualify for the lowest projected income tax rates.

Filed under: Candidate Barack Obama • Fact Check • Ronald Reagan • Taxes
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