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September 05, 2008

Quick Tax Summary

For a thorough, non-partisan evaluation of both candidates' proposed tax plans, as well as health plan costs, take a look at this summary provided by the Tax Policy Center.
Both candidates prefer to compare their plans to the “current policy” baseline, which would extend the 2001 and 2003 tax cuts and indefinitely extend an indexed AMT “patch”—and collect nearly $3.6 trillion less than under current law over the coming decade. Against that baseline, Obama would raise revenues by about $600 billion over the decade, while McCain would lose $600 billion. But choice of baseline doesn’t change how the proposals would affect the budget picture; without substantial cuts in government spending, both plans would sharply increase the national debt. Including interest costs, Obama’s tax plan would boost the debt by $3.5 trillion by 2018. McCain’s plan would increase the debt by $5 trillion.

The Obama plan would reduce taxes for low- and moderate-income families, but raise them significantly for high-bracket taxpayers (see Figure 2). By 2012, middle-income taxpayers would see their after-tax income rise by about 5 percent, or nearly $2,200 annually. Those in the top 1 percent would face a $19,000 average tax increase—a 1.5 percent reduction in after-tax income.

McCain would lift after-tax incomes an average of about 3 percent, or $1,400 annually, for middle-income taxpayers by 2012. But, in sharp contrast to Obama, he would cut taxes for those in the top 1% by more than $125,000, raising their after-tax income an average 9.5 percent.

5 comments:

  1. I posted this article in my blog. I thought it explains nicely why tax increases on the "wealthy" (small business owners) is a bad idea. From the Wall Street Journal article "Why Obama Can't Close the Sale" found at http://online.wsj.com/public/article_print/SB122039919493892941.html

    """Mr. Obama has proposed a massive tax increase on investors, business owners, and the "wealthy." At a time when the American people rate the economy as the central issue of the campaign, a tax hike doesn't make a lot of political sense. Voters know that a tax hike won't help the economy.

    Moreover, Mr. Obama's tax plans would directly or indirectly harm U.S. investors by raising the capital gains and dividend taxes. More than half of U.S. households are equity owners, so Mr. Obama's proposal risks alienating half the population.

    Mr. Obama claims to offer a tax cut to moderate-income families, but a significant portion of Mr. Obama's tax plan is a welfare giveaway costing more than $648 billion over 10 years, according to the Tax Policy Center.

    How so? He would authorize a hodgepodge of refundable tax credits covering everything from education, mortgage payments, child care and other items for people who do not pay income taxes now.

    About 38% of U.S. households pay no income tax today. Under a President Obama (whose policies would shave 15.3 million households off the tax rolls) that share would grow to nearly half of all American households. """"

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  2. I did read that article on your blog. I take exception to the notion that Obama's plan states that wealthy=small business owners. This article IS an editorial written by the director of the National Economic Council and assistant to the president from 2005-2007, and the president's economic policy speechwriter from 2002-2004 - hardly unbiased commentary. I'm sure they know more about the economy than I do, but forgive me if I take their word with a grain of salt. Show me an equally critical opinion of McCain's tax policy and I might be a little more inclined to listen. According to the numbers I see here, McCain's plan increases the national debt even more than Obama's, and gives less of of a break to middle class families. Them's the facts.

    I'll take my policy info from an unbiased source, thanks.

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  3. How will penalizing the wealthy help the economy? You don't need to be an economist to see that isn't a plan to "fix" the economy. More and more businesses are moving overseas because they are being taxed up the wazzoo and because the unions are out of control. Why do you think so many companies (like auto industry) are moving right across the border? Cheap, non-unionized labor and no taxes. Lets give big companies INCENTIVES for staying in the US.

    Heavily taxing the wealthy (and yes, small business owners. Jake's parents own a chain of paint stores and they make much more than the $250K baseline for wealthy) will make it even harder for them to compete in this volatile market and increase the unemployment rate.

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  4. I feel that the article you posted, and some of what you have stated, exaggerates Obama's positions. I don't think a 1.5 percent reduction in after-tax income for the wealthiest 1% of the population is "heavily taxing the wealthy."

    But putting that aside, here's my rationale - again, not an economist, but I read this summary from the Tax Policy center and here is what I see:
    Both Obama and McCain's plans increase the national debt, but Obama's increases it LESS by about $1.5 trillion.
    Middle income families see a 5% increase in after-tax income under Obama's plan, and a 3% increase under McCain's.
    The wealthiest 1 percent of the population sees a 1.5% decrease in after-tax income under Obama's plan, but a 9.5% INCREASE in after-tax income under McCain's.

    While I don't necessarily think that the wealthiest should face onerous tax increases, I think they can afford a 1.5% increase, and I certainly don't believe they deserve the greatest tax relief - 9.5% seems a little extravagant to me. When it comes to tax policy, I'm more inclined to choose the one that contributes LESS to the national debt and benefits the greater number of lower- and middle-income families - and I'd do so even if I were the one whose after-tax income was lowered 1.5%. I think I could manage.

    And as for small business owners, I defer to Factcheck.org's analysis, which sums it up pretty well, in my opinion.

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  5. Neither candidates tax policies are acceptable to me. I guess I lean more Libertarian in this topic. (remember, I'm NOT a Republican and in this election am voting for the lesser or two evils and shared values. I like Bob Barr, but it's unrealistic and a vote for Barr is a vote for Obama). I think all Americans should be charged at the same rate. Why should one person be taxed more because they are more sucessful? When you think about it, the wealthy are less likely to utilize government-funded programs like welfare or public schools, so if politicians want to play "fair" they should actually pay less. Obama's plans especially rub me the wrong way though, because I can't stand penalizing the wealthy for their sucess. And I am not a wealthy person saying this, either (blue-collar, single earner household).

    Smooth roads and big missles (interstate highway, infrastructure and national defense)- that is what the federal government should spend our money on. The rest is up to the state and local governments (federal republic)

    This post inspired my latest blog post. Check it out.

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