The $32,000 Question

FactCheck.Org

The McCain campaign falsely claims that Obama voted to raise income taxes on individuals earning "as little as $32,000 per year."

Summary

The McCain campaign claims that Obama voted to raise income taxes on individuals who earn as little as $32,000 per year. That's wrong.

• The resolution Obama voted for would not have increased taxes on any single taxpayer making less than $41,500 per year in total income, or any couple making less than $83,000. The $32,000 figure is approximately the taxable income of a single person making $41,500 per year, after all deductions and exclusions.
  

• Obama's vote (for a non-binding budget bill) does not change the fact that his own tax plan would provide a tax cut of $502 for a non-married taxpayer earning $35,000.

Update, July 11: After this article was posted the McCain campaign and the Republican National Committee aired a radio ad in two states repeating the bogus $32,000 figure. The campaign also sent an e-mail to reporters defending it, but failing to note that it refers to taxable income and not total income.

Analysis

Sen. John McCain's "economic adviser" Steve Forbes pushed the $32,000 claim July 7 in a conference call with reporters and in news interviews. Here's what he said in the call:

Forbes: Senator Obama has a series of tax proposals and tax actions that would devastate the American economy. For example, he has voted to increase income taxes on individuals earning as little as $32,000 a year. He doesn't make much of that on the campaign trail, but he did that in the Senate.

We can certainly see why Obama wouldn't "make much of this" – especially since it's not true.

What Obama voted for was a budget resolution that would have allowed most of the provisions of the 2001 and 2003 tax cuts to expire. In particular, the resolution would allow the 25 percent tax bracket to return to its pre-2001 level of 28 percent. That bracket kicks in at $32,550 for an individual or $65,100 for a married couple. (The McCain campaign relies on an AP article which puts the cutoff at $31,850, but that figure is from 2007, not this year.) So the McCain campaign claims that anyone making "as little as $32,000" would be affected by the rate increase.

But as those of you who have filled out a 1040 know, that's not actually how income taxes work. We don't pay taxes on our total earnings; we pay them based on our "taxable income." The Urban-Brookings Tax Policy Center's Eric Toder told FactCheck.org that "people with taxable income of $32,000 would have a total income greater than that." In 2008, anyone filing taxes with single status would be entitled to a standard deduction of $5,450, as well as a personal exemption of $3,500. So to have a taxable income high enough to reach the 25 percent bracket, an individual would need to earn at least $41,500 in total income, while a married couple would need a combined income of at least $83,000...............