“We said working folks deserved a break , so within one month of me taking office, we signed into law the biggest middle-class tax cut in history, putting more money into your pockets.”
— President Obama, Sept. 5, 2011
The president’s Labor Day speech in Detroit featured an assertion that contained a number of warning signs that it might be an errant fact: “biggest middle-class tax cut in history.”
First of all, anytime a politician claims he or she has done something historic, watch your pockets. That’s usually a dubious claim.
Then, “biggest” can mean all sorts of things. If we are talking about dollars, then are they inflation-adjusted or measured against the overall economy? Raw dollar figures are essentially meaningless without that context.
Finally, the “middle-class” modifier. What’s the definition of “middle-class”? There are many ways one could slice and dice that classification.
Clearly the president wants to demonstrate he’s a tax-cutter. And certainly White House officials have been frustrated that the $116 billion Making Work Pay tax cut was largely unnoticed by Americans.
We decided to put the president’s claim to the test.
We took an informal survey in our office and asked people what they thought the president’s statement meant. Everyone agreed he was claiming the biggest tax cut in terms of dollars.
“The point the president was making that is there is not a tax cut that has been enjoyed by such a broad section of the population,” an administration official said, pointing to a report that said that 95 percent of working families received some kind of tax cut under the Making Work Pay provision in his stimulus bill.
In other words, this isn’t about the size of the tax cut, but about the fact that every working family, except those making more than $190,000, received as much as $800 in tax cuts.
That strikes us as very odd way to claim “the biggest,” but maybe that’s because Obama can’t make that claim. We ran the numbers every which way, but the fairest over time is to look at the tax cut as a percentage of national income (Gross Domestic Product minus depreciation.)
John F. Kennedy seems to win the prize for biggest tax cut, at least in the last half century. By the same measure, the income tax provisions of George W. Bush tax cuts are more than twice as large as Obama’s tax cut over the same three-year time span. (Yes, a large portion of Bush’s tax cut went to the wealthy, but it also benefitted the working poor. We still don’t know what Obama means by “middle class,” since his definition also seems to include the working poor.)
Incidentally, the report that the administration official cited as “outside validation” for the 95 percent statistic just mentioned it as an aside. We checked with one of the co-authors, and he said the source for the figure was a White House fact sheet.
We’re not that impressed by the 95 percent claim, in any case. Essentially, all this means is that the top five percent of taxpayers did not receive the tax cut. Some economists might argue the cut-off limited the effectiveness of the provision as economic stimulus.
The Pinocchio Test
Obama’s claim of having passed the “biggest middle-class tax cut in history” is ridiculous. He might have been on more solid ground if he had claimed the “broadest” tax cut, but that doesn’t sound very historic.
We went back and forth over whether this was a three or four Pinocchio violation, until we found evidence that Obama knew he was saying a whopper. Here’s how he put it in his 2010 State of the Union speech: “We cut taxes for 95 percent of working families.” That phrasing, at least, would not have been so misleading.