McCain Tax Jab Overlooks His Own Proposal

ABC News' Teddy Davis, Rigel Anderson, and Hope Ditto Report:

John McCain is stepping up his assault on Barack Obama's tax plan.

The Arizona senator released a web video Thursday degrading his opponent's refundable tax credits as "welfare" and "government handouts."

Watch it: LINK

A day earlier, it was adviser Douglas Holtz-Eakin who was making the case against Obama.

"The most interesting place now where people have caught onto Barack Obama is in the area of a 'tax cut' for 95 percent of the American people, despite the fact that just under 50 percent literally pay no income tax," said Holtz-Eakin on a conference call with reporters.

"Now how can this be done?" he continued. "Well, Barack Obama has labeled mailing checks to individuals a tax cut."

McCain's top policy adviser then enumerated the following litany of refundable tax credits favored by Obama: (1) a "make-work-pay" credit of up to $500, (2) a universal mortgage credit of 10% of mortgage interest, (3) three different extensions of the Earned Income Tax Credit, (4) a refundable child care credit, (5) a saver's credit, (6) a Hope Credit, and (7) a 100% match of college expenses up to $4,000.

"This array of credits amounts to sending checks to individuals," said Holtz-Eakin, "In 2009, there would be checks sent to 57 million households in the US."

While Holtz-Eakin is correct in suggesting that refundable credits are a cornerstone of Obama's plan, the McCain campaign is overlooking that the center-piece of its own health care plan is . . . you guessed it . . . a refundable tax credit.

In fact, Holtz-Eakin himself has pointed to the refundable nature of McCain's health-care tax credit as the key reason why McCain's health care plan would cover more of the uninsured than proposals offered by President Bush.

While the benefits of a refundable tax credit extend even to those who have no federal income tax liability, they do pay other taxes: payroll, state, local.

"Given that McCain has offered a refundable credit for health insurance, it's hard for him to argue that Obama providing similar credits constitutes welfare," said Roberton Williams, a principal research associate at the non-partisan Tax Policy Center. "You have to have done something to get it. You have to have worked, or paid mortgage interest, or paid college tuition, or put money into a retirement account before you can claim the refundable credit."

"The only way you can reach people at the bottom end of the income distribution through the tax system is through a refundable credit," he added.

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