Tax Cuts: Obama vs McCain

The non-partisan Tax Policy Center has issued an updated edition of their Analysis of the 2008 Presidential Candidates’ Tax Plans: Revised August 15, 2008.

Their conclusions:  The two tax plans have sharply different “distributional effects”:

John McCain’s tax cuts primarily benefit high income Americans, who would receive large tax cuts that would on average raise their after-tax incomes by more than twice the average for all households. Middle-income taxpayers would see their after-tax income rise by about 3 percent, or $1400 annually, but those in the top 1 percent of incomes would receive tax cuts of over $125,000, raising their tax income by an average 9.5 percent.

Barack Obama’s tax cuts go to lower- and middle-class Americans, and he would raise taxes only for the highest incomes. 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 of incomes would see a $19,000 or 1.5 percent reduction in after-tax income.

John McCain’s tax plan would cost $4.2 trillion over ten years.

Barack Obama’s tax plan would cost $2.9 trillion over ten years.

The report states “McCain’s reduced individual and corporate [tax] rates could improve economic efficiency and increase domestic investment, but the large future deficits would reduce and might completely negate any positive effect.”

By estimating the cost of McCain’s plan as described in speeches, and the cost of his unspecified “optional alternative tax system,” the report concludes, “the revenue loss attributable to [McCain’s] plan increases to almost $7 trillion over the 10-year budget window.”

Factoring in Obama’s proposal for a 2 percent income surtax on adjusted gross incomes over $250,000, and a 2 percent payroll tax for employee earnings over that level, the report concludes that Obama’s plan would cost $2.6 trillion over ten years.

View the entire tax plan analysis sheet.