Senate Minority Leader Mitch McConnell (R-KY) has recently said that he does not believe that the stimulus proposal put forward by President-elect Barack Obama is sufficiently focused on tax cuts. While Obama's proposal reportedly does include as much as $300 billion in tax cuts, Senator McConnell argues that we need even more tax cuts, in particular for what he calls "the middle class." In pursuit of this alleged goal, McConnell proposes temporarily cutting the 25 percent income tax rate to 15 percent.
A new report from Citizens for Tax Justice explains that there are at least three severe problems with this plan:
1. By any reasonable measure, McConnell's proposed tax cut is not targeted to middle-income people. Instead, three-quarters of the tax cut would go to the best-off fifth of all taxpayers.
2. It is very likely that McConnell will initially try to cover up the true cost of his proposal, and then later insist that Congress spend vastly more money because his tax cut would otherwise expand the Alternative Minimum Tax (AMT).
3. The McConnell plan would function poorly as an economic stimulus.