The McCain and Obama Tax Plans for Individuals

An Explanation and Comparison of the Details and Economic Effects

This article explains and compares the McCain and Obama tax proposals as they affect individuals. Individual income and estate taxes are the focus, and this document does not currently consider the candidates’ non-tax health care plans, their plans with respect to corporate income taxes, or Senator McCain's plan for 2008 relief from the federal gasoline tax.

McCain and Obama Tax Proposals

Introduction
Income Tax Rates
Table 1 - Summary of Tax Rates
Under Existing Law, As Proposed by Senator McCain,
And As Proposed by Senator Obama
Exemptions and Deductions
Credits
1. Credits Under McCain's Plan
2. Credits Under Obama's Plan
Alternative Minimum Tax
Other Aspects of the Individual Income Tax
Estate Taxes
Summary

Listen mp3

Favorite

Collect this page

Introduction

Senators John McCain and Barack Obama see the role of taxes in vastly different terms. Generally speaking, Senator McCain aims to minimize the impact of taxes on the economy, thereby spurring greater economic efficiency. On the other hand, Senator Obama would use taxes to achieve economic and social goals such as making education, homeownership and child care more affordable, encouraging poor and senior citizens to work, and redistributing wealth from the affluent to the poor and middle-income segments.

Most of the tax cuts enacted under the Bush administration will expire at the end of 2010. As a result, unless changes are made, the current law increases taxes substantially in 2011. Relative to the tax increases scheduled under current law, both Senator McCain and Senator Obama propose tax cuts. However, compared with tax year 2008, Obama’s plan raises taxes by an estimated $600 billion while McCain’s plan would reduce taxes by $600 billion (over ten years).[1]

Senator McCain’s tax plan would increase wealth for the average taxpayer by 2.1 percent of income ($1,230) in 2009 and by 4.9 percent ($3,069) in 2012.[43] Not all taxpayers would see their taxes affected the same, however. Married taxpayers would benefit more than taxpayers in other filing statuses, but, more dramatically, wealthy taxpayers would benefit more under the McCain plan than the less affluent.[44]

For the one in 1,000 taxpayers with the highest incomes, the McCain plan would, on average, increase their wealth in 2009 by 4.7 percent of income ($290,708) and in 2012 by 11.6 percent ($680,157).[43] Under Senator McCain's plan, taxpayers in the middle quintile (i.e., with incomes between the 40th and 60th percentiles) would save 0.8 percent ($325) in 2009 and 3.1 percent ($1,441) in 2012.[43] Taxpayers in the bottom quintile would save 0.2 percent ($21) in 2009 and 0.9 percent ($101) in 2012.[43]

Senator Obama's plan would generally benefit taxpayers with children more than others.[45] On average, Obama's plan would increase wealth for taxpayers by 0.6 percent of income in 2009 and 3.4 percent in 2012.[46] In contrast with McCain's plan, low- and middle-income taxpayers would benefit more under Obama. Under Obama's plan, the wealthiest one in 1,000 taxpayers would see an 8.8 percent of income decrease in wealth in 2009 (2.7 percent in 2012).[46] Taxpayers in the middle quintile would receive a 2.8 percent of 2009 income increase in wealth and a 5.1 percent of income increase 2012.[46] The lowest quintile of taxpayers would benefit from a 6.3 percent of income increase in wealth in 2009 (7.5 percent in 2012).[46]

ElectionTaxes is a website that estimates user taxes based on the tax rules described below.

Both plans come with potential downsides. Senator McCain’s plan would spur efficiency and economic growth only as long as deficit spending is controlled (i.e., interest rates are kept in check) and the beneficiaries of tax savings invest these funds in the American economy. Although Senator Obama’s plan likely would result in smaller deficits, it is more complex and this complexity could burden the economy.[3] Obama intends to mitigate complexity by shifting some of the recordkeeping and tax return preparation burden from individuals to the IRS.

The next section compares tax rates under each of the plans. The third section explains how the proposals differ on the exemptions and deductions that should be allowed. Tax credits and other features under the plans are compared fourth. The fifth section discusses the candidates’ plans concerning the alternative minimum tax (AMT). Other proposals concerning the individual income tax are discussed in the sixth section. The seventh section briefly explains how Senators McCain and Obama propose to change the estate tax. A brief summary concludes the discussion.

Income Tax Rates

Under current law, the 10 percent income tax bracket will disappear in 2011.[4] In addition, the 28, 33, and 35 percent brackets will increase to 31, 36, and 39.6 percent, respectively.[4][5] Capital gains taxes are also set to increase. In 2008, taxpayers in the 10 and 15 percent ordinary income tax brackets are subject to no tax on long-term capital gains and qualified dividends,[6] and taxpayers in an ordinary income tax bracket greater than 15 percent are subject to a 15 percent maximum rate on capital gains and qualified dividends.[7] Starting in 2011, the tax rate is scheduled to increase to 20 percent on long-term capital gains (10 percent for taxpayers in the 10 and 15 percent tax brackets).[8] Also, starting in 2011, dividends will be taxed as ordinary income.[4]

Senator McCain’s plan would extend the Bush tax cuts that created the reductions now set to expire in 2011.[9] In other words, his plan would maintain the 10, 15, 25, 28, 33 and 35 percent brackets that are in effect in 2008.[10]

Senator Obama’s plan would extend most of the Bush tax cuts to middle income taxpayers.[11] The 10, 15, 25, and 28 percent tax brackets would remain. In addition, the lowered capital gains tax rates would remain in effect for taxpayers in these brackets. For taxpayers with incomes above these brackets, such as married taxpayers earning more than $250,000, the 36 and 39.6 percent brackets would return in place of the 33 and 35 percent brackets currently in effect. The tax rate on capital gains and qualified dividends would increase from 15 percent to 20 percent for taxpayers with adjusted gross income (AGI) greater than $200,000 ($250,000 for couples filing jointly).[12]

Table 1 compares the existing tax rates and those proposed by Senators McCain and Obama.

Table 1 - Summary of Tax Rates

Under Existing Law, As Proposed by Senator McCain,

And As Proposed by Senator Obama

2008 tax brackets	2011 tax brackets, under current law[13]	McCain plan	Obama plan
Ordinary income:
10%	15%	10%	10%
15%	15%	15%	15%
25%	28%	25%	25%
28%	31%	28%	28%
33%	36%	33%	36%
35%	39.6%	35%	39.6%
Capital gains:
0% 15%	10%[52] 20%	0% 15%	0% 15% 20%

Exemptions and Deductions

A tax is generally computed by multiplying a tax rate (or rates) by a tax base. As discussed above, with regard to tax rates, Senator McCain would make permanent the Bush rate cuts and Senator Obama would revert to the maximum tax rates that existed prior to Bush. But rates are only half of the equation. This section discusses how McCain and Obama differ in how they intend to determine the income subject to tax.

Under the tax cut laws enacted in 2001 and 2003, the reduction of exemptions for high-income taxpayers is being phased out over several years ending in 2010. Under Senator McCain, the reduction of exemptions is permanently eliminated, presumably starting in 2010, as scheduled. Under Senator Obama, the reduction of exemptions returns in full force starting in 2009.

Senator McCain would increase the dependent exemption by $500 each year starting in 2010, up to $7,000.[10] (The exemption for taxpayers and each of their dependents stands at $3,500 for tax year 2008.[14]) Starting in 2016, when the exemption reaches $7,000, it would again be indexed by inflation. While doubling the dependent exemption sounds good for taxpayers, current law already adjusts the exemption for inflation. As a result, McCain’s proposed increase is probably about two-thirds instead of 100 percent.[15] McCain offers a limited exception to this extended phase-in period: Starting in 2009, taxpayers filing jointly with income of $50,000 or less would be eligible for the $7,000 exemption.[10] However, this higher exemption would be reduced by $100 for each $1,000 of AGI greater than $50,000 (or fraction thereof), not to be reduced below the level for all taxpayers.[47]

Under Senator Obama, the personal exemption and itemized deduction phaseout thresholds would continue to be adjusted for inflation, as they are under current law.[16] Obama’s plan completely restores the phaseouts of personal exemptions and itemized deductions for taxpayers with incomes higher than the inflation-adjusted thresholds set under current law.[17]

Senator Obama would completely exempt from taxation those senior citizens whose income is less than $50,000.[18] Income for this purpose is adjusted gross income plus untaxed Social Security benefits and tax-exempt interest.[19] The $50,000 threshold applies to both single and joint-filing taxpayers and no phaseout is currently being considered, although a phaseout over the $10,000 range between $50,000 and $60,000 is probably necessary in order to avoid a "cliff" effect.

Credits

Once tax is computed as the product of the tax rate(s) multiplied by the tax base, taxpayers can reduce the tax owed by the amount of available tax credits. Many tax credits in the current law are non-refundable but both Senator McCain and Senator Obama propose introducing refundable credits. A refundable credit can be used to produce a tax refund from the IRS; a non-refundable credit can reduce tax but cannot create a tax refund.

1. Credits Under McCain's Plan

Senator McCain’s tax credit proposal is limited to replacing the current exclusion for employer-provided health insurance premiums and a very recent proposal for an energy tax credit for auto consumers. Senator Obama proposes credits that reward low-income workers, non-itemizing homeowners, savers, students, dependent care providers, and parents who adopt children.

To offset some of the cost of health insurance, Senator McCain proposes introducing a refundable tax credit of $2,500 for singles and $5,000 for couples.[20] The credit would be refundable in the sense that credits in excess of actual premiums paid would be contributed to the taxpayer's Health Savings Account.[12] Except for cases of employer-sponsored insurance where the existing exclusion would continue to apply, this credit would replace the current exclusion from income for premiums paid by an employer.[48] The health insurance credit would presumably be indexed for inflation.[48]

McCain would also provide a $5,000 tax credit to consumers who purchase a zero carbon emission car (smaller credits will be available to taxpayers purchasing low, but not zero, carbon emission cars).[21]

2. Credits Under Obama's Plan

Senator Obama’s plan includes several adjustments to existing credits, as well as the adoption of some new tax credits. He would create a refundable Making Work Pay tax credit that is designed to offset some of the cost of the employee’s share of the Social Security tax.[18] The credit would be calculated as 6.2 percent of an individual’s wages up to $8,100 in 2009 (adjusted thereafter for inflation) and would apply to wages for both spouses filing a joint return (i.e., a maximum total of $16,200 of wages).[17] The Tax Policy Center assumes that the Making Work Pay credit would be phased out at the rate of 5% of AGI in excess of inflation-adjusted thresholds beginning in 2009 at $150,000 for joint tax returns ($75,000 for others).[49]

Senator Obama’s plan introduces a refundable Universal Mortgage Credit equal to 10 percent of the mortgage interest paid in a given year for non-itemizing taxpayers; the credit would be capped at $800 in 2009 and adjusted for inflation thereafter.[50] Currently, non-itemizing taxpayers receive no tax benefit for mortgage interest paid.

Senator Obama would expand and make the existing saver’s credit refundable.[22] The credit would equal 50 percent of savings contributions, for a maximum credit of $250 for individuals and $500 for couples.[23] The credit would phase out at the rate of 5 percent of adjusted gross income that is greater than inflation-adjusted 2009 thresholds of $37,500 ($75,000 for couples).[24]

Senator Obama proposes renaming and expanding the Hope Credit. Under the American Opportunity Tax Credit, taxpayers would receive a credit for 100 percent of up to $4,000 of qualifying higher education expenses incurred at a qualifying postsecondary education institution.[25] Eligible expenses generally include tuition and fees during the first two years of post-secondary education. Payments would be made directly to the education institution based upon prior-year tax information, and students receiving the credit would be required to perform 100 hours of community service upon completion of their education.[26] Subject to a phaseout when income exceeds $47,000, the nonrefundable Hope credit provided 2007 taxpayers up to $1,650 in tax reduction for the first two years of qualified education expenses.[27] The Tax Policy Center assumes that the phaseout structure and indexation of the limit on qualifying expenses would continue as under current law.[51]

The earned income tax credit is a refundable credit designed to aid poor workers; this credit is substantially larger for workers who support one or more dependents. Senator Obama would expand the earned income credit by increasing the maximum income for determining the credit and the credit percentage rates. For childless taxpayers (both individual and joint filers), the income subject to the credit would increase from $6,300 in 2009 to $7,250 in 2012,[28] and the income level where the credit phaseout begins would also increase from approximately $7,390 in 2009 to $14,500 in 2012, and would be adjusted for inflation thereafter.[28] Subject to the phase-in and phase-out thresholds, childless workers paying child support would receive credit at the rate of 15.3 percent, twice the current 7.65 percent rate. For taxpayers with three or more children, the maximum credit rate would increase from 40 to 45 percent (but keep their phase-out rate at 21.06%). Instead of $3,100, couples filing jointly would be subject to phase-out at a threshold that is $5,000 greater than the threshold for heads of households in 2009, and this excess would be inflation-adjusted after 2009. Under Obama, the maximum earned income tax credit in 2009 increases from $175 to $555 for childless workers, and to $1,110 for workers paying for child's support.[28]

The child and dependent care credit would expand and become refundable under Senator Obama.[29] The maximum rate would increase from 35 to 50 percent, the phase-down threshold would increase from $15,000 to $30,000, and the phase-down rate would increase from 1 percent to 2 percent per $2,000 increment above the threshold.[30] In other words, the credit amount would not reduce until the taxpayer earns more than $30,000, but once that threshold is reached, it would reduce at twice the previous rate per $2,000 increment of additional income.

Senator Obama would extend the adoption credit and the earned income credit simplifications.[31]

Alternative Minimum Tax

The alternative minimum tax (AMT) was originally created to ensure that the wealthy pay taxes. However, because the AMT’s brackets and exemptions have not been permanently indexed for inflation, the AMT increasingly impacts middle-income taxpayers and burdens them with substantial direct and indirect (i.e., compliance) costs.[32] In 2007, for example, if Congress had not patched the AMT exemption amount, 23 million taxpayers would have been subject to the tax. Even after considering the patches that Congress has repeatedly adopted, three times as many individuals paid the AMT in 2005 as in 2001, and the number is expected to grow substantially unless structural changes are made.[33]

Tax practitioners report that truly wealthy taxpayers, such as those with taxable incomes greater than $2,000,000, rarely pay the AMT. This result probably occurs because most of the items that are added back in determining AMT income do not continue to increase in proportion to income for very high-income taxpayers (e.g., medical expenses, unreimbursed business expenses, standard deduction and/or personal and dependent exemptions).

Although Senator McCain has said that he would repeal the AMT, his senior economic adviser later indicated that he would instead index the AMT exemption based upon the 2007 level for the years 2009-2013.[34] This generally means that if you paid the AMT in 2007, under McCain’s plan you can expect to continue to pay the AMT until 2013 as long as your income and expenses keep up with inflation. Starting in 2014, under McCain the exemption would increase 5 percent per year, in addition to inflation, until it reaches $143,000, when again the exemption would be adjusted only for inflation.[10] McCain would also allow personal nonrefundable credits to be used to reduce the cost of the AMT.[35]

Senator Obama supports what he describes as “fiscally responsible” AMT reform.[36] Observers have taken this to mean that the current AMT exemption amounts would be adjusted for inflation from 2007 levels and that personal tax credits would be allowed permanently in determining the AMT.[36]

Other Aspects of the Individual Income Tax

Under Senator McCain’s plan, taxpayers could elect to compute their taxes under an alternative tax system, the Alternative Simplified Tax. The plan would require a multi-year commitment by the taxpayer, thus preventing taxpayers from annually choosing the most favorable method of computing taxes.[37]

Senator McCain proposes a ban on Internet transaction-based taxes.[38] In addition, he would ban new taxes on cellphone activity.[39]

Senator Obama would make 401(k) or IRA plan contributions automatic unless an employee chooses to opt out.[23]

Concerning perceived tax abuses, Senator Obama wants to tax carried interest, i.e., a fund manager’s share of distributions from a private equity or hedge fund, as ordinary income.[40] Obama would make the economic substance doctrine part of formal law; until now it has been developed only through case law. Affecting both individuals and corporations using tax shelters, this concept requires that transactions created for tax purposes must have economic justification beyond the tax benefits.[18]

Senator Obama’s proposal would shift the burden of preparing tax returns to the IRS for millions of Americans. He would create a system where many Americans can conduct their annual IRS-related business affairs online in five minutes or less.[18]

Estate Taxes

Senator McCain’s proposal permanently increases the estate tax exemption from $3.5 million in 2009 under current law to $5 million, and decreases the highest estate tax rate from 45 percent to 15 percent.[10] In addition to repealing the five-percent surtax, the state death tax credit would be permanently replaced with the current deduction for state estate taxes.

Senator Obama would make the 2009 estate tax rules permanent.[41] That is, he would exempt the first $3.5 million from the estate tax and continue the 45 percent top estate tax rate.

Summary

Although the vast majority of Senator McCain’s proposed tax cuts would benefit only the wealthiest taxpayers, if these taxpayers invest their tax savings into the American economy, and if these tax cuts are also accompanied by very large, indeed unprecedented, federal spending cuts, the McCain proposal could increase the efficiency of the economy. Potential pitfalls would be greater disparity between the rich and poor and inflation that may result if the federal budget deficit is not kept in check.

In contrast, Senator Obama’s proposal immediately produces deficit-cutting tax revenue and provides tax benefits to low- and middle-income taxpayers. Given their financial situations, these taxpayers are more likely than affluent taxpayers to spend most of their tax savings. This spending could also provide noticeable, albeit different, benefits for the economy. Greater complexity in the tax law would result from the Obama proposal, but decreases in the costs of processing and communicating information may reduce the economic impact of this complexity.

References

Burman, Khitatrakun, Leiserson, Rohaly, Toder, and Williams, “An Updated Analysis of the 2008 Presidential Candidates’ Tax Plans,” August 15, 2008, (revised slightly 8/21/08) is a report of the Urban-Brookings Tax Policy Center (hereafter the “Tax Policy Center 8/21/08 Report"). See page 1.
http://www.taxpolicycenter.org/
See pages 1 and 38 (among others) of the Tax Policy Center 7/23/08 Report.
http://www.taxpolicycenter.org/
The magnitude of the economic burden of tax complexity relative to benefits is unclear. For further insight, see Bill Gale’s 2001 article in Tax Notes, “Tax Simplification: Issues and Options” (Vol. 92, No. 11), September 10, 2001.
The sunset provisions are Sec. 901 of the Economic Growth and Tax Relief Reconciliation Act of 2001, Secs. 107 and 303 of the Jobs and Growth Tax Relief Reconciliation Act of 2003, and Sec. 102 of the Tax Increase Prevention and Reconciliation Act.
See Internal Revenue Code Section 1(i)(2).
http://www.fourmilab.ch/ustax/www/t26-A-1-A-I-1.html
Internal Revenue Code Section 1(h)(1).
http://www.fourmilab.ch/ustax/www/t26-A-1-A-I-1.html
Internal Revenue Code Section 1(h).
http://www.fourmilab.ch/ustax/www/t26-A-1-A-I-1.html
The capital gains rate will revert to 18 percent on qualified five-year capital gains (8 percent for taxpayers in the 10 and 15 percent brackets).
Senator McCain would not, however, permanently establish the tax cuts of the Pension Protection Act of 2006 (i.e., the savers's credit and the higher limits on contributions to tax-favored retirement accounts). See page 6 of the Tax Policy Center 8/15/08 Report.
http://www.taxpolicycenter.org/
See “The McCain Budget Plan,” in The Washington Post, July 14, 2008, a report from Senator McCain’s senior economic adviser, Douglas Holtz-Eakin (retrieved 7/29/08).
http://www.washingtonpost.com/wp-dyn/content/article/2008/07/13/AR2008071301643_pf.html
From Len Burman, host of the oral discussion at “Dueling Tax Plans: What Would McCain and Obama Do?” a conference presented by the Urban-Brookings Tax Policy Center on July 23, 2008 (retrieved 7/29/08).
http://www.taxpolicycenter.org/events/upload/TPC072308duelingcandidates.mp3
See page 10 of the Tax Policy Center 8/15/08 Report.
http://www.taxpolicycenter.org/
See Internal Revenue Code Section 1(a) through 1(d). Effectively, the 10% rate is scheduled to be replaced by the 15% rate in 2011.
http://www.fourmilab.ch/ustax/www/t26-A-1-A-I-1.html
See IRS Revenue Procedure 07-66, pp. 13-14 (retrieved 8/6/08).
http://www.irs.gov/pub/irs-drop/rp-07-66.pdf
See page 4 of the Tax Policy Center 6/20/08 Report.
http://www.taxpolicycenter.org/
See Internal Revenue Code Section 151(d)(4).
http://www.fourmilab.ch/ustax/www/t26-A-1-B-V-151.html
See page 10 of the Tax Policy Center 8/15/08 Report.
http://www.taxpolicycenter.org/
See page 2 of “Barack Obama's Comprehensive Tax Plan,” (retrieved 8/27/08).
http://obama.3cdn.net/b7be3b7cd08e587dca_v852mv8ja.pdf
See page 12 of the Tax Policy Center 8/15/08 Report.
http://www.taxpolicycenter.org/
See page 12 of Senator McCain’s “Jobs for America” briefing (retrieved 8/6/08).
http://www.johnmccain.com/Images/Issues/JobsforAmerica/briefing.pdf
See Senator McCain's website (retrieved 8/26/08).
http://www.johnmccain.com//Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm
Rules concerning the current refundable saver’s credit are found in Internal Revenue Code Section 25B.
http://www.fourmilab.ch/ustax/www/t26-A-1-A-IV-A-25B.html
See "Barack Obama's Retirement Security Agenda"(retrieved 8/26/08).
http://www.barackobama.com/pdf/retirementFactSheet.pdf
See page 11 of the Tax Policy Center 8/15/08 Report. However, the $65,000 credit threshold mentioned in the Report is increased to $75,000 to reflect the candidate's current threshold proposal on page 2 of the linked document (retrieved 8/26/08).
http://www.barackobama.com/pdf/retirementFactSheet.pdf
See Senator Obama's website (retrieved 8/6/08).
http://www.barackobama.com/issues/education/
See Senator Obama's website (retrieved 8/6/08).
http://www.barackobama.com/issues/service/
Internal Revenue Code Section 25A and IRS Publication 970, “Tax Benefits for Education.”
http://www.fourmilab.ch/ustax/www/t26-A-1-A-IV-A-25A.html
See page 11 of the Tax Policy Center 8/15/08 Report.
http://www.taxpolicycenter.org/
See Senator Obama's website (retrieved 8/6/08).
http://www.barackobama.com/issues/family/
See page 12 of the Tax Policy Center 8/15/08 Report.
http://www.taxpolicycenter.org/
See page 10 of the Tax Policy Center 7/23/08 Report.
http://www.taxpolicycenter.org/
For further information on the incidence and costs of the AMT, see Revenue and Tax Policy Brief Number 4, produced by the Congressional Budget Office and dated April 15, 2004, “The Alternative Minimum Tax” (retrieved 8/6/08).
http://www.cbo.gov/doc.cfm?index=5386&type=0
See “The Individual Alternative Minimum Tax: Historical Data and Projections, Updated June 2008,” by Greg Leiserson and Jeffrey Rohaly of the Tax Policy Center at the Urban Institute and Brookings Institution (retrieved 8/6/08).
http://www.taxpolicycenter.org/UploadedPDF/411703_individual_amt.pdf
See “McCain Will Repeal the AMT. Wait, no…” by Jeanne Sahadi on CNNMoney.com, June 14, 2008 (retrieved 8/6/08).
http://money.cnn.com/2008/06/13/news/economy/mccain_amt_phaseout/index.htm?postversion=2008061413
See page 7 of the Tax Policy Center 7/23/08 Report.
http://www.taxpolicycenter.org/
See page 10 of the Tax Policy Center 7/23/08 Report.
http://www.taxpolicycenter.org/
From Senator McCain’s senior economic adviser, Douglas Holtz-Eakin, oral discussion at “Dueling Tax Plans: What Would McCain and Obama Do?” a conference presented by the Urban-Brookings Tax Policy Center on July 23, 2008 (retrieved 7/29/08).
http://www.taxpolicycenter.org/events/upload/TPC072308duelingcandidates.mp3
See Senator McCain's website (retrieved 8/6/08). Presumably, McCain’s proposal would mean the removal of existing state sales and excise taxes on Internet-based transactions where the vendor has nexus in the state.
http://www.johnmccain.com/Issues/JobsforAmerica/taxes.htm
See Senator McCain's website (retrieved 8/6/08). One implication would be a reduction in existing state sales tax revenue (and related state-level budget shortfalls) arising from Internet-based transactions made by firms that have nexus in the state.
http://www.johnmccain.com/Issues/JobsforAmerica/taxes.htm
See "Tax Fairness for the Middle Class," by Barack Obama (retrieved 8/6/08) and page 12 of the Tax Policy Center 7/23/08 Report.
http://obama.3cdn.net/b7be3b7cd08e587dca_v852mv8ja.pdf
See page 5 of the Tax Policy Center 7/23/08 Report.
http://www.taxpolicycenter.org/
See page 25 of the Tax Policy Center 7/23/08 Report.
http://www.taxpolicycenter.org
See Table 6 (page 33) and Table 7 (page 34) of the Tax Policy Center 8/15/08 Report.
http://www.taxpolicycenter.org
See pages 2 and 35 of the Tax Policy Center 8/15/08 Report.
http://www.taxpolicycenter.org
See pages 30 of the Tax Policy Center 8/15/08 Report.
http://www.taxpolicycenter.org
See Table 4 (page 30) and Table 5 (page 31) of the Tax Policy Center 8/15/08 Report.
http://www.taxpolicycenter.org
See page 8 of the Tax Policy Center 8/15/08 Report.
http://www.taxpolicycenter.org
See page 9 of the Tax Policy Center 8/15/08 Report.
http://www.taxpolicycenter.org
See pages 10 and 11 of the Tax Policy Center 8/15/08 Report.
http://www.taxpolicycenter.org
See pages 2 and 3 of "Barack Obama: Tax Fairness for the Middle Class."
http://obama.3cdn.net/b7be3b7cd08e587dca_v852mv8ja.pdf
See page 11 of the Tax Policy Center 8/15/08 Report.
http://www.taxpolicycenter.org
Under current law, 8% and 18% rates will be reinstated in 2011 for capital assets held for qualified five-year gains. IRC Sec. 1(h)2), temporarily eliminated by Pub. L. 108–27, §§ 301(b)(1)(A).

Comments

Wlodzimierz Holsztynski

Wrong instrument or wrong application for the given instrument

The income tax has but one purpose: to provide the government with money to perform certain tasks. That's all. It is WRONG to (mis)use tax as a method to rectify the social, material inequality or to achieve any other goals. Different instruments should be used, NOT income tax, which should be (if at all) as simple as possible. Any misuse of the tax institution harms economy, is harmful to everybody, and to the poor especially. To help the poor we need CHARITY, not government, which lives off and destroys charity. Or, to get a real education system we need to stop the present virtual monopolization of education by bureaucracy; we need to release the intellectual potential of the society (scientists, engineers, medical doctors, artists, writers, dietitians, sport coaches, ...), so that they can contribute their( properly formatted by software) knols to students, via an educational system ran competitively as business, as any other healthy business (thus no income tax would be needed for education)--business+charity is the answer to education, and not any "We (the government) will sponsor better education". Government should stay away from science and education. Etc.

In general, when we make a reasonable transaction, it gives us a satisfaction and pleasure to pay for the obtained service or product. This is not the situation with the income tax, which is imposed on us. This alone proves that the system is wrong. As a good temporary measure the "Painless tax",

http://knol.google.com/k/wlodzimierz-holsztynski/art-of-agreeing-painless-tax/1jxfhq4x4sw0j/9#

is a good solution, which can be implemented gradually, over 4-5 years. If there are some people interested in it, I will extend my series of knols "Art of Agreement":

http://knol.google.com/k/wlodzimierz-holsztynski/art-of-agreeing-index/1jxfhq4x4sw0j/6#view

In particular, I'll formulate the main laws of agreements. The main rule though is that the Art of Agreement has to be continuously and creatively developed by many people.

Last edited Oct 30, 2008 11:30 AM

Report abusive comment

Post reply to this comment ▼

Anonymous

Tax Reform

Fair Tax . org

Last edited Sep 25, 2008 2:32 PM

Report abusive comment

Post reply to this comment ▼

Anonymous

Income Is not Wealth

"For the one in 1,000 taxpayers with the highest incomes, the McCain plan would, on average, increase their wealth in 2009 by 4.7 percent of income ($290,708)..."

This would increase their *income* by $290,708 -- not necessarily their "wealth". If the income was spent on something (say, multiple spa treatments or a trip around the world) that did not retain value, it would be an expense. The income would vanish with the expenditure. It would not leave any residual net worth -- which is how I define wealth.

A retired couple with $2 million dollars in liquid net worth, invested to conservatively pay out 5% per year would have income of $100,000. Are they wealthy? I'd say yes -- very few people have $2 million. Would they be taxed as the wealthiest among us? Not by either candidates plans.

These are important distinctions that get lost in the tax debate. We are talking about how to tax *income* for any given year -- but this has very little bearing on whether they are wealthy. A person who isn't wealthy (say, >$20,000 in net worth) who sells a sole proprietorship company for $1 million would be seen as having $1 million in income -- and be taxed as wealthy. But they are only beginning to attain the status that most consider wealthy. And after the government takes its 40%+ cut (federal income, payroll, and state income taxes) they'd have a nice lump, but not a size of money that would make them "wealthy" in the same way that retired couple is. After taxes, a conservative investment approach would yield $30,000/year on that remaining $600,000.

Last edited Sep 9, 2008 7:59 AM

Report abusive comment

Post reply to this comment ▼

Davidson Young

Income Gap

In your summary you said "McCain’s proposed tax cuts would benefit only the wealthiest taxpayers, if these taxpayers invest their tax savings into the American economy." That's a pretty big IF. I've heard a number of reports about the income gap widening more and more. Could it be that most wealthy taxpayers' investment are far less beneficial to the rest of the community than you think?

http://www.cbsnews.com/stories/2004/08/13/national/main635936.shtml

Last edited Sep 8, 2008 9:08 PM

Report abusive comment

Post reply to this comment ▼

Anonymous

More great research on the subject

here is a growing well researched list of sites from research tools that provide more information on this important issue...

http://www.topodia.com/topic/topicviewer.aspx?guid=41ef5d76-195b-4f1c-9611-23739074e16f

Last edited Sep 7, 2008 8:47 PM

Report abusive comment

Post reply to this comment ▼

Anonymous

Untitled

Now I have a grasp of what will actually be different depending on who is elected. I don't see them talking about real policy, and when they do its so abstract. This is a much needed clarification.

Last edited Sep 6, 2008 10:40 AM

Report abusive comment

Post reply to this comment ▼

Anonymous

Helpful and Clear

Thank you. This is the kind of balanced tool we need in the midst of PR overload. I already support one of the candidates, but I feel this kind of information goes much further toward a well-informed decision and will send the link to many people, decided and otherwise.

Sep 6, 2008 6:39 AM

Report abusive comment

Post reply to this comment ▼

Mark

Well Researched Article

And well referenced. This piece is nothing short of a university paper.

Last edited Sep 6, 2008 1:02 AM

Report abusive comment

Post reply to this comment ▼

Dopey

A concise, unbiased look at this election seasons tax plans.

A very helpful and interesting read. I'll be posting copies of this in various public building around my city. This would greatly benefit anyone still "on the fence" as to who they'll be voting for.

Last edited Sep 5, 2008 8:57 PM

Report abusive comment

Post reply to this comment ▼

Christine P.