Obama Unveils Tax Plan

Expanding on his anti-Washington theme, Democratic presidential candidate Barack Obama said Tuesday that he would take back tax breaks from monied interests to provide $80 billion annually in relief for workers, seniors and homeowners.

The Illinois senator said connected corporations and wealthy investors have benefited in the current tax code and it's time to give money back to the workers who fuel the U.S. economy.

Obama's plan was short on some specifics. But he said he would give 150 million workers a $500 payroll tax credit, expand relief on mortgage interest, eliminate income taxes for seniors making less than $50,000 and simplify returns so millions can file in less than five minutes.

"We need a tax code that's fair - a tax code that rewards work and advances opportunity," Obama said in a speech to the Tax Policy Center.

He used the example of a single mother who pays income taxes and sales taxes, then retires and has her Social Security benefit taxed.

"Meanwhile, her boss's investments get taxed at a lower rate, and the corporation she works for has all kinds of loopholes built into the tax code because they've got lobbyists in Washington sticking up for their interests," Obama said. "It's time for that to change. It's time for Americans to have a president in the Oval Office who makes decisions based on their interest, not the special interests."

Obama's 20-minute speech included much of that populist rhetoric combined with more detail about each of his tax cut proposals. But he spent just one minute skimming over how he would pay for it and neither he nor his campaign provided a breakdown of the revenue his plan would raise.

Obama's campaign said he would pay for his proposals by closing corporate tax loopholes, cracking down on international tax havens and raising the top rate on capital gains and dividends. But the campaign did not say how much each of those proposals would generate.

When Obama announced his health care plan in May, his campaign said he could pay for it by rolling back several Bush tax cuts that benefit the wealthy. That included restoring the top rate on investments to pre-Bush levels: 20 percent for capital gains and 39.6 percent for dividends.

Now Obama's advisers say they have more than enough revenue from other sources to pay for his health care plan and the capital gains and dividends increase can be used in part to fund the tax plan. However, they could not say how much that would raise or exactly how high Obama would raise them except that the top rate for both would be between 20 percent and 28 percent - the rate President Reagan set in 1986.

Obama's campaign also didn't say how much each of his proposals would cost, only that the total would be between $80 billion and $85 billion each year when fully implemented.

They said the largest cost would be for a "Making Work Pay" credit that would offset payroll taxes on the first $8,100 of earnings, generating up to $500 per person or $1,000 per family. The campaign said that would eliminate income taxes for 10 million classified as low income.

The campaign also said the credit would phase out for wealthier taxpayers, but wouldn't say what the income cutoff would be.

Obama said more people who own their homes should get relief from mortgage payments. The current mortgage interest deduction only goes to those who itemize their taxes, while Obama would create a universal mortgage credit of 10 percent of interest payments that the campaign says would benefit an additional 10 million homeowners.

The campaign said Obama's plan to eliminate taxes on seniors making less than $50,000 annually would mean 22 million elderly would no longer need to file an income tax return or hire a tax preparer.

Additionally, the IRS would send prefilled tax forms to 40 million workers who take the standard deduction and have a bank account. They would simply have to sign and return it, which Obama estimates would save more than $2 billion in tax preparer fees, 200 million hours of work and "an incalculable amount of headache and heartburn."

Republican National Committee spokeswoman Lisa Miller tried to raise doubts that Obama would be a tax cutter.

"In their '08 Budget proposal, Obama and his Democrat colleagues are proposing the largest tax increase in the history of our country, but while on the campaign trail he promises $80 billion in relief," Miller said. "Which Obama should we believe?"