Barack Obama and John McCain offer dramatically different tax plans – and the election could hinge on which of them convinces millions of worried middle-class voters he’s their champion.
Obama takes the Robin Hood approach: taxing the rich and giving more tax breaks to low- and moderate-income workers and seniors, including new subsidies for those who currently pay no taxes.
The Democrat would repeal President Bush’s income-tax cuts for people earning more than $250,000 and sock the well-to-do with higher corporate and capital gains taxes.
He also has talked about hiking Social Security payroll taxes on higher-income taxpayers and businesses to fund benefits.
The wealthiest Americans would face an average tax increase of $700,000, or 11 percent, under his tax plan.
But for those families struggling to pay for their kids’ college, Obama would provide a yearly tax credit of $2,200 to $4,000 to help cover the tuition of students who agree to perform community service after they graduate.
McCain’s plan retains the Bush tax cuts for all income earners, nearly doubles the exemption for dependents, slashes the corporate tax rate to 25 percent from 35 percent, lowers the “death tax” on estates and maintains lower capital-gains taxes.
The Republican’s tax cut – aimed at spurring the economy – tilts more to helping higher-income taxpayers, married couples and job producers.
But both candidates’ plans have one thing in common: They adjust the alternative minimum tax to protect middle-income taxpayers.
An independent analysis by the nonprofit Tax Policy Center shows that both candidates can claim bragging rights to help the middle class – depending on how broadly you define middle class, especially in high-tax, high-cost-of-living New York.
In most cases, taxpayers earning $50,000 or less fare better under Obama, the analysis showed. He targets tax relief – including a “Making Work Pay” break cutting the Social Security payroll tax on lower-income workers and the self-employed.
Those making more than $100,000 do better under McCain, benefiting from his plan for lower income, corporate and capital-gains taxes.
The Tax Policy Center said McCain’s proposed cuts would spur economic activity and business investment – but warned that larger deficits would “reduce and could completely offset any positive effect.”
The group estimates that McCain’s plan over 10 years would cost the Treasury $3.7 trillion to $4.1 trillion in revenue.
Obama’s plan would cost $2.7 trillion.
The group panned the McCain plan as regressive and too tilted toward the rich rather than the needy.