Political price tags

By David Milstead, Rocky Mountain News (Contact)

Published October 3, 2008 at 12:05 a.m.

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There are people who believe there isn't much difference between the two major American political parties and the men who represent them in this fall's election.

Those people are not examining the economic plans of Sen. John McCain, the Republican nominee, and Sen. Barack Obama, the Democratic candidate for president.

McCain has wholeheartedly embraced a program of individual and corporate tax cuts, most of which benefit the wealthy Americans who have the most money to invest and spend. Obama has a tax plan that has a smattering of benefits for business and the upper middle class, but ultimately takes from the wealthiest to give to the least fortunate.

Says the Tax Policy Center, a venture of the Urban Institute and the Brookings Institution, "If enacted, the Obama and McCain tax plans would have radically different effects on the distribution of tax burdens in the United States."

"The Obama tax plan would make the tax system significantly more progressive by providing large tax breaks to those at the bottom of the income scale and raising taxes significantly on upper-income earners," the Tax Policy Center says.

"The McCain tax plan would make the tax system more regressive, even compared with a system in which the 2001-06 tax cuts are made permanent. It would do so by providing relatively little tax relief to those at the bottom of the income scale while providing huge tax cuts to households at the very top of the income distribution."

The costs are huge, since all the tax cuts passed in the current Bush administration are scheduled to expire in the next president's first term. Presuming the tax cuts end, the candidates' proposals would reduce tax revenues by an estimated $4.2 trillion (McCain) and $2.9 trillion (Obama) over the next 10 years, the Tax Policy Center says. The group also estimates the McCain health-care plan would cost an additional $1.3 trillion over ten years, with the Obama plan costing about $1.6 trillion.

The campaigns have told the Center they dispute these figures, since they don't count any potential spending cuts (which the candidates have not substantially identified.)

The current meltdown in the nation's financial system forced the candidates to scurry to keep up with events.

Both men voted in favor of the revised plan passed Wednesday by the Senate.

To give readers an overview of the candidates' agendas, the Rocky reviewed the report from the Tax Policy Center, as well as the economic plans on the Obama and McCain Web sites.

John McCain

The bailout

* Now calls the original, failed bill "flawed" and voted for the plan that passed the Senate on Wednesday, saying it now contains "taxpayer protections, stronger oversight, limitations on executive compensation and more protections for people's bank accounts."

Personal taxes

* Maintain the Bush tax cuts for all income groups.

* Do not increase capital gains and dividends taxes.

* Increase estate tax exemption to $5 million and cut rate to 15 percent.

* Increase the dependent exemption by $500 annually between 2010 and 2016, until it reaches $7,500.

* Extend and increase a "patch" in the alternative minimum tax that prevents the tax from being applied to larger numbers of households.

Corporate taxes

* Reduce corporate income tax rate to 30 percent in 2010-11, 28 percent in 2012-13, 26 percent in 2014, and 25 percent after.

* Allow full expensing of all business equipment that would normally be deducted over 3 years to 5 years, as long as companies do not deduct interest paid to finance the equipment.

* Eliminate the "domestic production activities deduction" for U.S. manufacturers.

* Eliminate several provisions that benefit oil companies, like special depreciation schedules that allow quick expensing (and resulting tax savings).

* Make a tax credit for research and experimentation permanent, and equal to 10 percent of all wages spent on it.

Health care

* Create a tax credit of $2,500 for individuals and $5,000 for families for health insurance coverage. Any money left over after paying health-care premiums could go into a personal health savings account.

* Cut costs through safe re-importation of prescription drugs and faster introduction of generics; emphasize prevention and early intervention to combat chronic disease; better information systems and technology.

Trade

* Engage in "multilateral, regional and bilateral efforts" to reduce barriers to trade and build effective enforcement of global trading rules.

* Overhaul unemployment insurance and "make it a program for retraining, relocating and assisting workers who have lost a job," and strengthen community colleges and technical training to give displaced workers more choices.

Barack Obama

The bailout

* Voted for the Senate bill. Describes the current situation as a "direct result of the greed and irresponsibility that has dominated Washington and Wall Street for years."

Personal taxes

* Maintain the Bush tax cuts for individuals less than $200,000 and families making less than $250,000. Restore Bill Clinton-era tax rates for those above.

* Raise the maximum tax rate on capital gains and dividends from 15 percent to 20 percent for the highest earners.

* Set an exemption of $3.5 million and a top rate of 45 percent, for the estate tax.

* Create a new "Making Work Pay" credit of roughly $500 for wage earners and the self- employed.

* Exempt senior citizens earning less than $50,000 from income tax.

* Extend a "patch" in the alternative minimum tax that prevents the tax from being applied to larger numbers of households.

Corporate taxes

* Make permanent both the research credit and the renewable energy production credit.

* Eliminate capital gains taxes for start-up businesses.

* Eliminate oil and gas industry "loopholes."

* Require that transactions qualifying for tax benefits have economic justification beyond the tax benefits.

* Impose a "windfall profits" tax on oil and gas companies to pay for a $1,000-per-family "emergency energy rebate."

Health care

* Provide subsidies to low-income families who lack employer-sponsored insurance.

* Penalize employers who do not offer health insurance while also providing subsidies for small employers.

* Expand the state children's health insurance program and Medicaid.

Trade

* Use trade agreements "to spread good labor and environmental standards around the world" and pressure the World Trade Organization to enforce trade agreements.

* Amend the North American Free Trade Agreement with Canada and Mexico, which he believes was "oversold" to the American people.

* Update the existing system of Trade Adjustment Assistance by extending it to service industries, create flexible education accounts to help workers retrain, and provide retraining assistance for workers "in sectors of the economy vulnerable to dislocation before they lose their jobs."

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