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A Project of The Annenberg Public Policy Center

Dems Mislead on McMahon’s Tax Stance

A TV ad funded by two Democratic PACs falsely claims Linda McMahon’s “tax plan hurts middle-class families.” Actually, her tax plan would reduce the marginal income tax rates for middle-income families — married couples earning roughly between $70,700 and $142,700 — while keeping the current rates the same for everyone else.

The ad also distorts the facts when it says McMahon — a Republican candidate for the Senate from Connecticut — “threatened to eliminate” the Department of Education and to cut “early reading programs and college Pell Grants.”

Asked at a 2010 candidate forum to name three or four agencies that she would “dismantle,” McMahon said she would consider the Department of Education. But she prefaced her remarks by saying she would not know if any agency “should be totally dismantled and done away with until I’ve had an opportunity to look at it more.” Even if McMahon wanted to “dismantle” the Education Department, that does not necessarily mean she wants to eliminate all the programs it currently administers.

A Tax ‘Sleight of Hand’?

The ad, titled “Cards,” began airing on Sept. 21. It’s being financed by both Majority PAC, which is committed to keeping the Senate in Democratic control, and Connecticut’s Future PAC, a group formed in July by two state lobbyists with Democratic ties, a Democratic state legislator, and a former state elections official to help McMahon’s opponent, Rep. Chris Murphy.

The ad starts with a card dealer and a narrator who warns to “watch carefully as Linda McMahon does a sleight of hand.” It claims McMahon’s “tax plan hurts middle-class families … while cutting taxes for millionaires like herself.”

The ad’s sponsors, however, are the ones who engage in sleight of hand — ignoring McMahon’s current tax plan to cut taxes for middle-income taxpayers and focusing instead on her support two years ago for extending the Bush-era tax cuts for all taxpayers.

The simple fact is that McMahon’s tax plan calls for eliminating the 25 percent income tax bracket and dropping those taxpayers to the 15 percent bracket.

Who would benefit from the proposed change in the tax rates? In 2012, married couples with taxable income of between $70,700 and 142,700 and individuals with $35,350 to $85,650 in taxable income were in the 25 percent tax bracket. Under her plan, those taxpayers instead would pay a top rate of 15 percent.

McMahon also proposes eliminating the capital gains tax for those same taxpayers and others who earn less than that, while keeping the Bush-era capital gains tax rate and dividend tax rate at the current level of 15 percent for taxpayers subject to the top three tax brackets.

So, how do the Democrats justify their claim that “her tax plan hurts middle-class families”? The ad cites McMahon’s position in the debate over the Bush-era tax cuts in the fall of 2010, during her unsuccessful Senate race against Richard Blumenthal.

As for the claim that her plan cuts taxes for “millionaires like herself,” the ad’s sponsors point to a 2004 study on the distributional effects of the Bush tax cuts.

Let’s first look at the 2010 debate to extend the Bush-era tax cuts.

At the time, President Obama and Democratic leaders wanted to extend the tax cuts for two years but only for those with incomes under $250,000, while Republican leaders wanted to keep the rates unchanged for all taxpayers.

Then House Minority Leader, now House Speaker, John Boehner said on CBS’ “Face the Nation” on Sept. 12, 2010 that he would vote to extend the tax cuts for those earning $250,000 or less if there was no other option. But he added that he would “fight to make sure that we extend the current tax rates for all Americans.”

Even though Boehner included a major caveat and stressed his desire to keep fighting for an across-the-board tax extension, there was speculation in the media that Republicans might back down. Senate Republican Leader Mitch McConnell ended that speculation a day later by reiterating that Republican senators opposed raising taxes for any taxpayers.

By that point, CBS News reported Boehner was “back on message” and unequivocally supported extending the tax cuts for all taxpayers. Republicans were united, and ultimately the Bush tax cuts were extended for two years for all.

During this brief period of Beltway bloviation and the ensuing media speculation, McMahon was asked if she supported McConnell’s position over Boehner’s. McMahon answered “yes,” according to a Sept. 14, 2010 article in the Connecticut Mirror.

The Democratic sponsors of the ad say the Mirror story proves that McMahon “supported blocking middle-class tax relief to save Bush tax cuts for [the] wealthy.” That’s not true. It is only evidence that she supported keeping the tax cuts for all taxpayers.

In that same Mirror article cited by the Democrats, McMahon is quoted as saying, “I would push forward to maintain for everyone the tax law that’s in place now” and “I’m absolutely in favor of keeping the tax rates the way they are today.”

Now, for the 2004 study on the distributional effects of the Bush tax cuts.

The Democrats cite a 2004 Washington Post article with the headline, “Tax Burden Shifts to the Middle.” The article describes an August 2004 study by the nonpartisan Congressional Budget Office that detailed the effects of the 2001 Bush tax cuts on household income quintiles. The study found that the three middle income groups — the middle 60 percent of America — saw their share of the total federal tax payments increase from 2001 to 2004 by 0.2 percent for the second quintile, 0.5 percent for the middle quintile, and 1 percent for the fourth quintile. (See Table 2, “Share of Total Federal Tax Liabilities.”)

But this doesn’t “hurt middle-class families.” The effective tax rate fell for taxpayers in all quintiles. Just because they paid a higher percentage of the federal total does not mean they paid more in taxes.

Eliminate the Department of Education?

The ad also says McMahon “threatened to eliminate” the federal Department of Education, “cutting early reading programs and college Pell grants.” This distorted claim is based on a news account of an answer that McMahon gave at a candidate forum held by a Tea Party activist in April 2010 during McMahon’s first failed Senate race.

McMahon was asked what three or four federal agencies she would “dismantle.” She prefaced her remarks by saying, “I’m not sure that I know an agency should be totally dismantled and done away with until I’ve had an opportunity to look at it more.” She then went on to say that the Education Department should get a “first look,” claiming that it is inefficient and ineffective.

McMahon, a former member of the Connecticut Board of Education, also said she is a “strong, strong proponent of state and local educational systems” and supports standardized testing.

The question and answer starts at the 4:55 mark of a YouTube video of her appearance before the group.

Question: Take three or four agencies that you would dismantle — and that’s the word that I’d like to use….

McMahon: Well, first of all, you mean dismantle and do away with? Okay. I’m not sure that I know an agency should be totally dismantled and done away with until I’ve had an opportunity to look at it more. Some that come to mind that I think would have a first look: one would be the Department of Education. They’ve got 4,200 employees in the Department of Education. Some federal funding comes from that department, also from two or three other different departments, to local schools. But, honestly, I can’t imagine that we need 4,200 people to operate an educational system which has not improved much over the last 30 years. And, as I said earlier, I’m a strong, strong proponent of state and local educational systems. I do think there has to be a measurement of progress and performance, whether it is a national test or a state test. I do believe in that. But I don’t think it all ought to come from Washington, I think it should come locally.

McMahon did “threaten” to consider eliminating the Education Department. But that’s as far as the Democrats can take it. Even if she did, it’s not accurate to say — without any other evidence — that she believes in “cutting early reading programs and college Pell grants.”

— Michael Morse and Jesse DuBois, with Eugene Kiely