What Election 2008 Will Do For Our Economy, and Your Tax Bill 11 comments
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The economic visions of the presidential candidates in 2008 are dramatically different, and the contrast is most striking when they discuss taxation. Barack Obama will steal from the pages of English folklore and take from the rich to give to the poor; well, actually, to the middle class, who will benefit from major tax cuts. John McCain sees things differently, and he will cut taxes across the board - most heavily in the highest income bracket, who will see more than $250,000 pumped back into their wallets. (Editor's note: This figure has been corrected from its original version on 9/1/08.)
Source:Tax Policy Center via CNNMoney.com
The data above, compiled by a nonpartisan policy group in Washington DC, doesn’t take into account Obama’s plans to change the capital gains tax - and he’s been quoted saying that he’ll hike it as much as 20%, or 25%, from the current 15%. That would hit the rich hard, too - but conservatives are concerned it would have much broader implications on the nation’s economic health by discouraging investment in the stock markets.
But the money to pay for Obama’s ambitious agenda has to come from somewhere - $75 million in tax cuts, $15 billion in renewable energy spending over 10 years, and a proposed infrastructure reinvestment bank will be expensive. Obama even seems to be tacking to the center on military spending, indicating an eagerness to pursue the conflict in Afghanistan while he sticks to his antiwar roots by advocating an end to a U.S. military presence in Iraq.
The presidential hopeful will need every bit of the extra money from America’s richest taxpayers to finance his “change” agenda - especially if, as expected, the Democrats continue to hold Congress, and he can carry momentum into his first term to pass a liberal slate of legislation not seen in America since the activist ’60s.
McCain, meanwhile, will take a very different approach. If he holds form, he’ll bring in new sources of oil to ease the upward pressure on oil and gas prices, and he’ll help consumers in all income brackets by lowering taxes. His economic platform is remarkably light on proposed programs, however, and a conservative, status quo approach to fiscal governance seems to be his method. It remains to be seen what Commander in Chief McCain would do at the head of the U.S. Army, though - and whether the cost of conflicts in Iraq, Afghanistan, or Iran would make it impossible for him to follow through on plans to lighten the load on American taxpayers. Either way, he’ll focus on stimulating business, and he disagrees sharply with Obama on capital gains reform, energy reinvestment, and the housing crisis, arguing that these should be left to private market forces, not government intervention.
If you’d like to read more about the economics of the 2008 Election, here’s a couple of links:
The complete economic platforms of each candidate.
The candidates’ specific approaches to taxation.
It will be interesting to see how these platforms evolve as the election season closes, and these ideas in their nascent stages could be of lasting importance if the eventual President can pass his proposals through Congress. And investors, taxpayers, and Americans should watch carefully for the election’s effect on their country, and their wallet.
Disclosure: None
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This article has 11 comments:
Hey dude, i don't know if you noticed this, but McCain's plan is for a decrease in payments from EVERY SINGLE income bracket. That's the money that's gotta come from "somewhere." I also notice you don't include the total cost of McCain's tax cuts. Hmm.
That "status quo" approach to governance you mention -- is that the status quo of George W. Bush, the one that has ballooned government spending to the largest size EVER, and the federal deficit to $800Bn? Just curious. Republicans are NOT fiscally responsible, and haven't been in years.
Might want to take those blinders off.
A tax HIKE of 20% off a base of 15% results in a 18% tax rate (.15*1.2). That is not what Obama said.
Obama has said he'd raise capital gains taxes to 28% which is an 86% tax HIKE (.28/.15-1). Even moving from 15% to 20% (as you claim) is a 33% tax HIKE.
So we're going to nearly double taxes on risk capital. Genius approach to economic growth.
That's what you get when you elect a career politician who has never created a job for anyone in his life or risked capital to build anything.
If Obama gets elected, he'll have a Democratic Congress, so he'll repeal the Bush tax cuts; and perhaps pass some new ones for the middle class. He will also be pushed to spend by a Democratic Congress.
If McCain gets elected, he won't get support from the Democratic Congress to push for any more tax cuts; nor will be have support to extend Bush's tax cuts, many of which, such as capital gains and dividends expire at the end of this year. The tax rates will reset at the end of 2010. Worst case (from a Federal Budget perspective), the top will have 2 more years of lower taxes rates (maybe not a bad thing given the current economic malaise). On the spending side though, you'll see substantially less spending, since McCain will likely veto new spending proposals (or at least more than Obama would).
Net net, even if McCain wanted to be as profligate as Bush, he couldn't be; and given that he'll be able to control spending more than Obama (remember, the affable Carter couldn't control his Democratic Congress either), you should wind up with a lower budget deficit.
Again, people need to remember HOW our government actually works when they vote; the President is not the King; his budgets have to be approved by Congress.
I think you misread your own graphic. The McCain plan would cut taxes for the top guy by $269K while the Obama plan would take $700K out of the top earner wallet. It's interesting that every major tax cut going back to JFK has increased the share of income tax paid by the top brackets. In 2006, the top 5% of taxpayers paid 60% of income taxes and the bottom 50% paid a grand total of 3%. (source www.taxfoundation.org/.... What will happen when tax rates go WAY up as proposed by Sen Obama is that the higher incomes will find legal ways to defer or avoid taxes thus decreasing revenues. This is not opinion. This is what has happened every time tax rates increase.
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"In short, it is a paradoxical truth that ... the soundest way to raise the revenues in the long run is to cut the rates now. The experience of a number of European countries and Japan have borne this out. This country's own experience with tax reduction in 1954 has borne this out. And the reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."
– John F. Kennedy, Nov. 20, 1962, news conference
Thanks for the insightful comment as well.
Obama's plan calls for cap gains and dividend rates to increase to 20%, not 28% And only if you make over $250,000. For those making less than $250,000, the those tax rates remain at 15% like they are now.
In case you feel sorry for those of us making over $250K, 20% cap gains is the same as under Clinton. You know what? I'd rather pay 20% on the gains I made in the 90s, than 15% on the "gains" I made in the 00s.