The St. Louis Post-Dispatch reports that Joe Biden committed a common tax error while criticizing John McCain's tax plan. Biden used average health care costs of $12,000 per year to give an example of the effects of the McCain proposal of a $5,000 credit.
According to the Post-Dispatch, Biden said $7,000 would still be taxable. This indicates Biden is confusing tax credits with tax deductions. A credit reduces a tax liability dollar for dollar. A deduction reduces taxable income before the tax rate is applied.
A taxpayer in the 25% bracket would incur tax of $3,000 on $12,000 of taxable income. The $5,000 would be applied directly to the tax liability. Biden, apparently, would incorrectly deduct $5,000 from $12,000 income and then apply the tax rate. Fortunately for Biden, Delaware has the highest per capita rate of CPA's in the United States.
According to the Post-Dispatch, Biden said $7,000 would still be taxable. This indicates Biden is confusing tax credits with tax deductions. A credit reduces a tax liability dollar for dollar. A deduction reduces taxable income before the tax rate is applied.
A taxpayer in the 25% bracket would incur tax of $3,000 on $12,000 of taxable income. The $5,000 would be applied directly to the tax liability. Biden, apparently, would incorrectly deduct $5,000 from $12,000 income and then apply the tax rate. Fortunately for Biden, Delaware has the highest per capita rate of CPA's in the United States.
As bad as that is, it gets worse. It seems that Biden believes that McCain is making economic sense and that is bad for America! (Video is here at 5:25).
Obama-Biden's new slogan: Vote for us, the party that believes Economic Sense is Bad for America!
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