The Wall Street Journal
McCain's Tax Plan Favors Wealthiest, Analysis Says
Obama's Skews Benefits to Lower, Middle Classes
By DEBORAH SOLOMON
June 12, 2008; Page A8
Both John McCain and Barack Obama promise to cut taxes for the majority of Americans. But an Obama administration would redistribute income toward lower- and middle-class households, while a McCain White House would steer the bulk of the benefits to the wealthiest families, according to a nonpartisan analysis of the still-evolving tax plans of the presidential candidates. Both plans risk causing more economic damage than improvement, according to the detailed study by the Washington-based Tax Policy Center. While some of Sen. McCain's tax cuts could lift economic activity, the "adverse effects of the resulting increased deficits may make the net effect of the plan economically harmful," the report says. Sen. Obama's plan similarly "would substantially increase the deficit" and could create "additional complexity" to the tax code by offering a range of targeted breaks.
With concerns about the economy foremost on voters' minds, both candidates have sought to claim the mantle of economic steward... Sen. McCain's top economic adviser, Doug Holtz-Eakin, said the study was flawed in its estimate of the candidate's plan's impact on the deficit because it didn't factor in his proposed spending cuts. Sen. McCain has said he plans to balance the budget by 2013 by getting rid of "wasteful" spending, such as earmarks.
(snip)
Jason Furman, a top economic adviser to Sen. Obama, said the study "confirms that Barack Obama is committed to tax cuts for middle-class families." But the advisers criticized the yardstick used to measure the impact of the tax plans on the deficit. The study made certain assumptions about taxes going forward, including that Mr. Bush's tax cuts will expire as scheduled. Both candidates prefer to measure their policies against a baseline in which Mr. Bush's tax cuts are extended because it makes the resulting cost to the government of their cuts look smaller.
The study analyzed the different ways different taxpayers would benefit under an Obama or McCain administration. Under Sen. McCain's plan, taxpayers on average would get a tax cut in 2009 equal to 2% of after-tax income. Under Sen. Obama's plan, taxpayers on average would get a tax cut next year equal to 0.3% of after-tax income. Under Sen. McCain, those in the middle -- making between $66,354 and $111,645 -- would see their after-tax income increase by 0.7%. The biggest benefit would flow to those in the top 0.1% -- those with incomes above $2.8 million -- who would see their after-tax income increase by 4.4%. Sen. Obama skews his tax cuts toward the lower- and middle-end of the income scale. Those in the middle would see their after-tax income increase by 2.4% , or $1,042. Americans with incomes above $2.8 million would see their after-tax income decrease by 11.5%.
(snip)
The impact of the candidates' plans on the economy would depend largely on how they finance their tax cuts, said Len Burman, director of the Tax Policy Center. Tax cuts financed through spending cuts or other offsets would be much better for the economy than deficit-financed tax cuts, which would cause a drain by forcing more government borrowing and higher interest rates, he said.. Sens. McCain and Obama are both proposing ways to cover the costs of their tax plans to the Treasury, but the study's authors said it wasn't certain that either candidate could raise the amount of revenue they are projecting. In addition to spending cuts, Sen. McCain has proposed broadening the corporate income tax base eliminating some tax breaks for oil companies, among other things.
(snip)
URL for this article:
http://online.wsj.com/article/SB121319990210164643.html (subscription)
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
