The candidates’ tax plans have gotten attention during the debates, in stump speeches and in campaign ads. Trying to understand the plans from commercials and sound bites is difficult. What is true and what is rhetoric? The best way to learn what each has to offer is to read the full plan on their websites, as well as independent analysis of the plans.
For example, Barack Obama has promised a tax cut to 95 percent of all American tax payers. Part of his proposal calls for a 3 percent increase in taxes for the top tax bracket. McCain and Palin have branded the plan “socialism”, invoking the name of Joe the Plumber in stump speeches across the country. They accuse Obama of spreading the wealth through income taxes.
But is the plan really socialism? Is it really even a new tax? The current tax cuts are set to expire next year. Unless they are reauthorized in Congress, which doesn’t look likely, the tax schedule will revert to what it was under the Clinton Administration. This is the same rate that Obama is proposing in his plan. Technically, it isn’t a new tax increase, but a roll back of Bush tax cuts.
Obama and other Democrats have called the Bush tax cuts irresponsible because they were unfunded. What does that mean and why does it matter? They were unfunded because the reduction in revenue was not accounted for with a corresponding reduction on the federal budget. In other words, the tax cut contributed to the rising deficit. When the budget isn’t balanced, there will be an increase in deficits.
The McCain campaign appears to have latched onto this issue as a main talking point and is now expanding on it with the idea that new business or jobs will be stifled if the tax rates are rolled back. I live in Pennsylvania, and the market is literally saturated with ads showing business owners saying they won’t hire new workers, if Obama is elected president.
Is this true, or just a scare tactic? Well, the old wisdom is to look to history to help predict the future. When Clinton proposed an increase in tax for the wealthiest tax bracket, Republicans, including George HW Bush said much the same thing about stifling job growth. But what happened? The Clinton years saw unprecedented entrepreneurship and job growth. The unemployment rate dropped for seven of his years in office, all but the first.
Other than the increase for the top 5 percent, Obama has promised all tax payers a reduction in their taxes. To find out what that means for your family, you can visit Obama’s website and use a calculator to estimate your savings under both Obama and McCain’s plans. You can find it on barackobama.com.
Reading non partisan fact check websites and independent analysis of the candidates’ plans can help sort out the differences and the truth from fiction. Factcheck.org has disputed the claims of socialism, as well as several other claims about Obama’s plan they have labeled as misleading, such as that Obama plans to tax electricity and home heating oil.
The Tax Policy Center has reviewed the plans and determined that both would increase the national debt and result in a revenue loss. The problem for McCain is that his tax plan actually showed a larger growth in the debt, with lost revenues over 10 years of 7 trillion dollars. For Obama, there would also be a revenue loss of 2.9 trillion in the same time frame.