You’ve Got Mailers!

A direct-mail piece sent to voters by the Clinton campaign twists Obama’s words and gives a false picture of his proposals:

• It says he "wants to raise Social Security taxes by a trillion dollars," a big distortion. Obama has said a “good option” would be to apply Social Security payroll taxes to incomes over $97,500 a year, but that would only affect taxes paid by 6.5 percent of individuals and couples. And he hasn’t formally proposed such a move anyway.
• The Clinton mailer says Obama has "no plan" for a moratorium on foreclosures such as the one Clinton has proposed. That’s true, but Obama has his own plan for homeowner relief. The mailer leaves the impression that Obama has "no plan" at all, which is false.
• It says Obama "voted for Dick Cheney’s energy bill that gives huge tax breaks to oil companies," another distortion. By the time Congress passed the 2005 energy bill, it raised taxes on the oil industry more than it decreased them and also contained billions for alternative fuels research and subsidies for energy-efficient buildings and vehicles.

Analysis

The battle between Democratic front-runners Hillary Clinton and Barack Obama is turning into one fought with good old-fashioned snail mail. Both have launched attacks on the other through fliers delivered to voters’ mailboxes. Here we take a look at a recent Clinton mailer sent out in Arizona, which was posted on The Atlantic magazine’s Web site. Clinton has made similar claims in a mailer distributed in Nevada and in Democratic debates.

Perhaps the most eye-catching claim in the Clinton mailer is the charge that Obama "wants to raise Social Security taxes by a trillion dollars." That’s an awful distortion. Nothing Obama has proposed or supported would affect Social Security taxes paid by the overwhelming majority of workers.

First, the cap on income subject to Social Security taxes was set at $97,500. (It went up to $102,000 in January.) Obama has said he’s open to raising the cap, but such a move would only increase taxes on people earning more. In fact, lifting the cap would affect taxes paid by 6.5 percent of individuals and couples, according to Citizens for Tax Justice. Second, the "trillion dollars" is an estimate of the amount of taxes to be collected over a decade and only if the cap is eliminated completely. And third, Obama has said that increasing the cap is a good choice, but he hasn’t formally proposed to do so or said whether he’d eliminate it entirely or increase it to some higher level, or some other option. Meanwhile, Clinton herself has not formally disavowed the idea of raising the payroll tax cap, though she hasn’t come out in support of it.

Obama has publicly supported the idea of raising the payroll tax cap on a number of occasions. In a Sept. 26 debate in New Hampshire, he said that lifting the cap was "probably going to be the best option" and "much preferable to the other options that are available." But he came just short of promising to do so:

Obama, Sept. 26 debate: I think that lifting the cap is probably going to be the best option. … My personal view is that lifting the cap is much preferable to the other options that are available.

Later, on Nov. 11 on NBC’s "Meet the Press," Obama indicated that a Social Security tax increase could fall only on those making more than $200,000 a year:

Obama, Nov. 11 "Meet the Press": I have not specified exactly how we would structure it. Conceivably, you might have the equivalent of a doughnut hole … where you have a gap between people who are of middle income and very wealthy people.

The Tax Policy Center estimates the "doughnut hole" approach, which had been proposed by former presidential candidate John Edwards and would have left incomes between $97,500 and $200,000 untaxed, would increase tax revenue by $816 billion, also over 10 years.

During the Sept. 26 debate Clinton said she wasn’t willing to talk about raising the wage cap, or any specific proposals to shore up Social Security’s solvency, as long as the U.S. continued to run large budget deficits.

Here’s her exchange with moderator Tim Russert:

Russert: But you would not take lifting the cap at 97.5 off the table?

Sen. Clinton: Well, I take everything off the table until we move toward fiscal responsibility and before we have a bipartisan process. I don’t think I should be negotiating about what I would do as president.

The Clinton mailer also draws a distinction between the two candidates’ proposals to help homeowners in danger of foreclosure. It says that Clinton has a plan for "a moratorium on foreclosures and a freeze in mortgage rates for at-risk homeowners," while Obama has "no plan" for a moratorium on foreclosures. That’s true. But such language might give some voters the impression that Obama has proposed nothing to address housing issues. That’s false.

Obama does have a plan – it’s just not Clinton’s – that calls for the creation of a fund to assist homeowners in refinancing their mortgages. The fund would be partially paid for by "increased penalties on lenders who … commit fraud," according to his Web site. Clinton specifically proposes a moratorium on foreclosures for a minimum of 90 days and a freeze on adjustable rate loans for at least five years. Also, the mailer says Clinton has a plan "to cut taxes for the middle class" but doesn’t mention that Obama, of course, has one, too.

The mailer further charges that Obama "voted for Dick Cheney’s energy bill that gives huge tax breaks to oil companies." Obama did vote for the 2005 energy bill to which Clinton refers. But as we’ve said more than once before, her claim that the legislation resulted in large tax breaks for the oil industry is misleading.

In fact, the bill President Bush signed into law in 2005 actually raised taxes on the oil industry overall. The nonpartisan Congressional Research Service said that the Energy Policy Act "included several oil and gas tax incentives, providing about $2.6 billion of tax cuts for the oil and gas industry. In addition, [the act] provided for $2.9 billion of tax increases on the oil and gas industry, for a net tax increase on the industry of nearly $300 million over 11 years."

Many subsidies were proposed during debate, but they didn’t make it into the final bill, which contained a total of $14.3 billion in tax breaks, most of which didn’t go to the oil industry. Instead, they benefited electric utilities and nuclear power, as well as alternative fuels research and subsidies for energy-efficient buildings and vehicles.

Clinton has been consistent, however, in her opposition to the tax breaks the bill contained. She voted for the bill that originally passed the Senate, but spoke out against and opposed the final conference bill, objecting to tax provisions it included as well as the deletion of provisions to reduce oil consumption and increase the use of electricity from renewable sources. Obama voted for both bills and lauded provisions regarding ethanol, which is produced in his state of Illinois.

– by Emi Kolawole and Lori Robertson

Update, Feb. 7: In our original story, we didn’t note that the Social Security payroll tax cap had increased in January to $102,000.

Sources

Citizens for Tax Justice, "An Analysis of Eliminating the Cap on Earnings Subject to the Social Security Tax & Related Issues," 30 Nov 2006.

Tanner, Michael. "Keep the Cap: Why a Tax Increase Will Not Save Social Security." Cato Institute, 8 June 2005.

Tax Policy Center. Options to Adjust Social Security Earnings Cap, Static Impact on Individual Income and Tax Liability and Revenue, 2 Jan. 2008.

Obama, Barack. "Plan to Strengthen the Economy." BarackObama.com, 6 Feb. 2008.

HillaryClinton.com. "Hillary Calls on Wall Street to Address Housing Crisis." Press release, 5 Dec. 2007, accessed 6 Feb. 2008.

Congressional Research Service. Oil and Gas Tax Subsidies: Current Status and Analysis. Washington: GPO, 2007.

Obama, Barack. "Obama Says Provision in Energy Bill to Double Ethanol Use, Invest in Clean Coal Will Help Illinois." Press release, 28 June 2005, accessed 6 Feb. 2008.

Congressional Record – Senate. Comments by Sen. Clinton, 29 July 2005.