PoliGraph: Obama advisor right on tax cut claim

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President Barack Obama’s senior campaign adviser David Axelrod was in Minnesota this week, fundraising and meeting with campaign staff.

During his stop, Axelrod spoke with reporters, and he pointed out that Obama is supporting an extension of low interest rates on federal student loans.

That’s not what Republicans in Congress want, he said.

“Just this week we’ve had a big debate over whether or not we’re going to let student loan interest rates double in June as they would unless Congress acts,” Axelrod said. “What’s interesting is that the very same Congress that says we can’t afford the $6 billion to do that passed a $46 billion unpaid tax cut, half of which would go to high-end people.”

Axelrod’s statement is right on the cost of the tax cuts, and by at least one estimate, right on the effect of the cut.

The Evidence

Last week, Obama asked Congress to extend the 3.4 percent interest rate on federal loans that students currently pay. If it doesn’t, the interest rate will double to 6.8 percent in July.

Likely Republican presidential nominee Mitt Romney said he supports the idea. But some House Republicans have concerns about approving the $6 billion extension, including Minnesota Rep. John Kline who chairs the House Education and Workforce Committee and who would oversee such a bill.

Last week, the House passed a Republican plan to provide a tax deduction to businesses of any type with fewer than 500 employees that amounts to 20 percent of income in 2012. The deduction would be limited to half of employee wages.

The plan would increase the deficit by $46 billion over 10 years because it’s not paid for with spending cuts or other tax increases, according to the non-partisan Congressional Budget Office.

Critics say the bill would provide tax breaks to companies that may be small in the sense that they don’t have many employees, but otherwise very profitable.

According to the Tax Policy Center, a Washington, D.C.-based partnership between the Brookings Institution and the Urban Institute, more than half of the tax change would go to the top 1 percent.

But an estimate conducted by the Joint Committee on Taxation, a committee that consists of House and Senate lawmakers from both parties, is more modest; it estimates that roughly 33 percent of the tax would go to businesses earning more than $500,000 annually.

The different percentages stem from a difference in assumptions, said Joe Rosenberg of the Tax Policy Center. For instance, Rosenberg said his group assumes the tax savings for corporations benefit capital owners, which is the same assumption used by the Congressional Budget Office. The Joint Committee on Taxation does not take the corporate tax into account.

The Verdict

Axelrod’s statement is in the ballpark. He describes the small business tax credit bill correctly, but chooses a higher – but not necessarily incorrect – estimate to support his claim that more than half of the bill would benefit the highest earners.

On balance, Axelrod’s claim is true.


David Axelrod’s press call with Minnesota reporters, April 24, 2012

The New York Times, Student Loan Interest Rates Loom as Political Battle, By Tamar Lewin, April 20, 2012

House Education and Workforce Committee, Kline Statement on Stafford Loan Interest Rates, April 20, 2012

The Washington Post, Competing small business tax cut plans: House Republicans vs. Senate Democrats, by J.D. Harrison, March 27, 2012

The New York Times, Assessing the Small Business Tax Cut, by Robb Mandelbaum, April 23, 2012

The Congressional Budget Office, H.R. 9, Small Business Tax Cut Act, April 9, 2012

The Tax Policy Center, H.R. 9: The Small Business Tax Cut Act: Assumptions, accessed April 25, 2012

The Tax Policy Center, H.R. 9: The Small Business Tax Cut Act; Baseline: Current Law; Distribution of Federal Tax Change by Cash Income Percentile, 2012, March 28, 2012

Letter from the Joint Committee on Taxation regarding H.R. 9, April 13, 2012

  • Ralph Crammedin

    The people running the Republican Party, both in Minnesota and nationally, simply hate the idea of an educated middle class. This is the underlying principle behind their ceaseless attacks on both students and teachers.

    In a Republican perfect world, the upper class would be well educated in private institutions, and the rest of us would go to work as soon as we were able, to turn a profit for the Republican Aristocracy.