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A Project of The Annenberg Public Policy Center

There He Goes Again

McCain ad misrepresents Obama's tax plan. Again.


The McCain-Palin campaign has released a new ad that once again distorts Obama’s tax plans.

  • The ad claims Obama will raise taxes on electricity. He hasn’t proposed any such tax. Obama does support a cap-and-trade policy that would raise the costs of electricity, but so does McCain.
  • It falsely claims he would tax home heating oil. Actually, Obama proposed a rebate of up to $1,000 per family to defray increased heating oil costs, funded by what he calls a windfall profits tax on oil companies.
  • The ad claims that Obama will tax "life savings." In fact, he would increase capital gains and dividends taxes only for couples earning more than $250,000 per year, or singles making $200,000. For the rest, taxes on investments would remain unchanged.

The McCain campaign argues in its documentation for this ad that, whatever Obama says he would do, he will eventually be forced to break his promise and raise taxes more broadly to pay for his promised spending programs. That’s an opinion they are certainly entitled to express, and to argue for. But their ad doesn’t do that. Instead, it simply presents the McCain camp’s opinion as a fact, and it fails to alert viewers that its claims are based on what the campaign thinks might happen in the future.


In what has become an ongoing theme, the McCain-Palin campaign has released yet another ad that makes false claims about Barack Obama’s tax plan. The ad, which was released on Sept. 18 and which the campaign says will air nationally, claims that Obama will raise income taxes and will tax "life savings, electricity and home heating oil." As we keep saying, Obama says he’ll raise income taxes and capital gains taxes only for couples earning more than $250,000 per year or singles making over $200,000. He has proposed no plans to raise taxes on either home heating oil or electricity.

[TET ]McCain-Palin 2008: "Dome"

Narrator: When our economy’s in crisis, a big government casts a big shadow on us all.

Obama and his liberal Congressional allies want a massive government, billions in spending increases, wasteful pork. And, we would pay — painful income taxes, skyrocketing taxes on life savings, electricity and home heating oil. Can your family afford that?

McCain: I’m John McCain and I approve this message.[/TET]

Electric Charges

The ad opens with standard-issue Republican warnings of the economic dangers of big government before proclaiming that Obama and his liberal allies want to bring back "a massive government" complete with billions in spending increases and waste. We are then told that Obama would raise income taxes and would increase taxes on "life savings, electricity and home heating oil."

This isn’t the first time the McCain-Palin campaign has claimed that Obama would raise taxes on electricity. The claim is just as false now as it was when it first came up. The campaign bases its charge on a single comment Obama made in an interview with a San Antonio columnist. Obama did in fact say, "What we ought to tax is dirty energy, like coal and, to a lesser extent, natural gas." But, as we said then, the comment is grossly out of context. Obama’s remark comes after he was asked whether we ought to tax renewable energy sources. This was not a general call for increasing taxes on coal or natural gas, and Obama certainly does not have any such proposal as part of his public platform.

One could argue that Obama’s proposed cap-and-trade program constitutes an indirect tax on electricity. But McCain proposes cap-and-trade, too, and we haven’t heard McCain say that he wants to tax your electric bill. These programs are designed to reduce carbon emissions by requiring companies to pay for pollution credits. Since most electricity in the U.S. is generated via coal and natural-gas plants, both carbon-emitting fossil fuels, a cap-and-trade program will result in higher electricity costs.

Overheated Claims

Contrary to the ad’s claim, Obama has not proposed raising taxes on home heating oil. In fact, just the opposite. Obama is proposing rebate checks of up to $500 per individual or $1,000 per family for what he calls an "emergency energy rebate." Obama says the rebate would be large enough that a typical family in a northern state could offset the full increase in home heating costs that have resulted from rising oil prices. Obama plans to fund the rebate through a five-year windfall profits tax on oil companies.

The McCain-Palin campaign counters that a windfall profits tax on oil companies will raise the cost of heating oil. The campaign points to a Washington Post editorial which charges that the cost of the five-year tax:

Washington Post (Aug. 6): would be passed along in forgone investment in new production, lower dividends for pension funds and other shareholders, and higher prices at the pump – thus socking it to the consumers whom the plan is supposed to help.

This is a fairly standard view in economics. Corporations don’t really pay taxes. Any taxes levied on a corporation are passed along to one of three places: shareholders, in the form of smaller dividends on their investments; employees, in the form of lower wages; and consumers, in the form of higher prices. The McCain-Palin campaign’s argument is that increasing taxes on oil companies amounts to increasing the price of heating oil and that that increase really is just a tax being levied on home heating oil. But the tax could also fall mainly on the stockholders of the oil companies, in the form of reduced after-tax profits, dividends and stock prices. That is actually how both the Congressional Budget Office and the independent, nonpartisan Urban-Brookings Tax Policy Center allocate the benefits of tax changes on corporations.

We’ll leave it to you to decide whether or not a windfall profits tax on oil companies makes economic sense. But it is misleading to describe Obama’s view as a tax on home heating oil when Obama is actually proposing a rebate for home heating costs and a tax increase for oil companies.

Life Savings

 The ad’s claim that Obama will raise taxes on your "life savings" is only true if you’re an individual making more than $200,000 (or a couple earning more than $250,000) and paying capital gains and dividend taxes. (We’ve said this many times now.) The "ad facts" that the McCain campaign released to reporters state very prominently that "Barack Obama would raise capital gains and dividend taxes" and that 26.7 million Americans received capital gains income while 31.5 million received dividend income. That’s all true. But the very article that the campaign cites to support its claim also says quite clearly that Obama will raise capital gains and dividend taxes only on couples making more than $250,000 per year. We’d also note that more than 80 percent of all capital gains income in 2006 went to those earning more than $200,000 a year. See our Ask FactCheck on the subject for more.  

McCain’s Magic 8 Ball

The ad says sweepingly that "we would pay" the increased taxes, even though what Obama has proposed would produce tax cuts, not tax increases, for about 80 percent of all workers and families and about 95 percent of those with children, according to independent analysis by the Tax Policy Center. To justify its claim that "we" would pay, the McCain campaign is making a new argument. In an "ad facts" document, it cites two opinion columns which argue that Obama’s new spending proposals would require him to break his pledge, and to raise taxes on couples making less than $250,000 per year. That’s a prediction, which the McCain campaign states as fact in its ad. Viewers are given no indication that the ad is based on opinion about what could happen in the future.

It’s certainly true that Obama’s proposed spending is higher than his projected revenues, and Obama has made no secret of the fact that his plan will not result in balanced budgets for the next four years. According to the Tax Policy Center, without spending cuts elsewhere, Obama’s proposals could increase the projected debt to $5.9 trillion over 10 years. The McCain-Palin campaign is certainly entitled to argue that that level of debt is unsustainable and that Obama would therefore have to raise taxes.

That, however, is a dangerous argument. The same Tax Policy Center analysis shows that McCain’s proposals could raise the debt to $7.4 trillion over 10 years. And while McCain has promised to balance the budget by 2013, the Tax Policy Center notes that doing so would require a 25 percent reduction in federal spending. Few economists outside the McCain-Palin campaign think that is a feasible goal. So, by the ad’s logic, Obama could just as easily claim that McCain supports a massive tax increase. But if he did he would have no more justification than McCain does for this ad.

In fact, it’s impossible to know for certain what either candidate will actually do if elected. Both sides are free to speculate. But unless they possess really good Magic 8 Balls, they are not free to present those speculations as settled facts.

Correction, Sept. 18:  As originally posted we said Obama’s proposed spending is lower than projected revenues, when we meant to say higher.

Correction, Oct. 1: In our original story, we incorrectly reported that according to the Tax Policy Center "Obama’s proposals could lead to between $3.6 trillion and $5.9 trillion in new debt over 10 years" and that "McCain’s proposals would raise the debt by between $5.1 trillion and $7.4 trillion over 10 years." We misread the report. In fact, the TPC found that Obama’s proposals could increase the projected baseline debt by an additional $3.6 trillion to a total of $5.9 trillion. Similarly, McCain’s proposals could raise the baseline debt by an additional $5.1 trillion to a total of $7.4 trillion. Thanks go to an astute reader who pointed out the error.

– by Joe Miller


"Tapping Tired Wells." Washington Post. 6 August 2008.

Herman, Tom, "Your Tax Bill: How McCain, Obama Differ." The Wall Street Journal. 18 June 2008.

"The Lexington Project: Breaking Our Dependence on Foreign Oil." 2008. JohnMcCain.com. 30 July 2008.

S.139: The Climate Stewardship Act of 2003. 9 January 2003. 30 July 2008.

Guerra, Carlos. "Q&A With Sen. Barack Obama." 19 February 2008. The San Antonio News-Express. 30 July 2008.

Burman, Len, et. al. “An Updated Analysis of the 2008 Presidential Candidates’ Tax Plans: Revised August 15, 2008.” Tax Policy Center, 15 Aug. 2008.