The Tax Cut For "95% of Working Families"

There has been a lot of clamor surrounding this piece of Obama's tax proposals. Conservatives want to know: Given that approximately 40% of Americans don't pay federal income taxes, how in the world can he cut 95% of working Americans' taxes?

hilzoy takes a stab:

Hmm. This is a tough one. How can you cut taxes for people who pay no income taxes? Magic? Welfare? Or maybe -- just maybe -- people who pay no income taxes pay some other kind of tax.

I know, I know: how could there be any sort of tax other than the (federal) income tax? I have heard that in distant lands there are strange, exotic taxes, like the "sales tax", the "property tax", "state and local income taxes", the "capital gains tax", "use taxes", "permit fees", other fees, the "severance tax", the "occupational privilege tax", the "estate tax", the "gift tax", the "federal excise tax", and even the fantastically named "generation skipping transfer tax". But surely we have no such outlandish customs here! We who live in a country that has only one sort of tax, the federal income tax, can only stare in wonder at those benighted countries where people actually pay taxes whenever they buy a shovel or realize capital gains.