9-09-08, 1:22 pm
John McCain has been targeting some battleground states with a misleading ad campaign that claims Barack Obama wants to raise taxes on working families. Recent analysis of the two candidates' tax plans by the nonpartisan Tax Policy Center reveals, however, that all but the wealthiest households would see lower taxes under the Obama plan than under McCain.
According to Business Week, lower- and middle-income households, up to about $250,000 per year, would see their net incomes (total income after taxes) rise as much as nearly six percent under the Obama plan, as much as nine to almost 23 times more than under McCain, depending on which income bracket they fall into.
In commenting for Business Week on the new analysis of the two candidate's proposals, Doug Holtz-Eakin, McCain's top economics advisor, appeared to back away from McCain's claim that Obama would raise taxes on middle class families. Instead, Holtz-Eakin insisted that McCain's plan – remarkably similar to George W. Bush's tax breaks for the wealthiest Americans and new corporate tax cuts, like $4 billion for oil companies – 'might prove better for jobs and the economy.'
By comparison, the Tax Policy Center analysis showed that benefits to middle-class families under McCain's plan would be minimal at best. The bottom fifth would see a rise in aftertax income of a mere 0.2 percent, while many middle income wage earners would reap just a 0.7 percent benefit.
The Obama campaign was quick to point out that the people facing the toughest times in the current economic crisis are the 101 million working families who would see nothing or next to nothing in McCain's tax plan. This includes 37 million seniors, the Obama campaign added.
The Obama campaign strongly refuted Holtz-Eakin's claim that such a policy is better for the economy or the federal budget deficit. While McCain's plan would leave little for working families, it would extend Bush's tax policy and spending $2 trillion more for new tax breaks for corporations and wealthy corporate executives. George W. Bush's tax and economic policies saw the federal budget move from large surpluses to $200 and $300 billion dollar deficits. His policies pushed the national debt up to a record $10 trillion. While the McCain tax plan is more of the same Bush agenda, it just isn't sound fiscal or economic policy, the Obama campaign pointed out.
In addition to the tax code changes that would benefit 101 million working families, Obama has called for $1,000 energy rebates for families and $500 rebates for individuals to go to 95 percent of Americans. The rebates would be paid for with a windfall profits tax on oil companies that have earned record profits on price gouging and speculation.
Pumped up by $2 million for his campaign from the oil and gas industry, John McCain opposes the windfall profits tax on oil companies. He favors a temporary suspension of the gas tax, which by all estimates would save consumers only a few dollars of the proposed three-month term of the suspension. But this savings would accrue only if, and it is a big if, the oil companies decided to pass the savings onto consumers by lowering prices, experts have noted. There is little reason, though, to expect the oil companies would pass on the savings.
John McCain's program does, however, sneak a new tax increase on working families via his health care proposal. According to the New York Times, McCain's health care plan would impose a tax on employee health benefits for the first time in history. McCain's new tax would total about $3.6 trillion and would erase any slight savings working families would see in other parts of his tax proposals. (And, for good measure, few observers believe that McCain's new health care tax would reduce in any significant way the number of people without health insurance.)
Supporters of the tax relief policy Obama is advocating say that tax cuts for 101 million working families will more directly stimulate economic growth and will provide real relief to families struggling in today's economy. In addition, supporters point to the economic recovery in the early 1990s following the Clinton administration's middle-income tax cut, as well as subsequent sustained economic growth throughout the 1990s and higher federal revenues that helped balance the federal budget as evidence of the soundness of Obama's plan.
