[CitizensTruth] Obama, McCain and the Truth About Taxes

[Daniel Stafford]

http://www.truthout.org/article/obama-mccain-and-truth-about-taxes


      Obama, McCain and the Truth About Taxes
      <http://www.truthout.org/article/obama-mccain-and-truth-about-taxes>

Tuesday 16 September 2008

by: Maya Schenwar, t r u t h o u t | Report

photo
(Illustration: The New Yorker)

    Unless you make more than $2.87 million per year, Barack Obama will 
not raise your taxes. In fact, he will probably cut them.

    This reality has been trampled, twisted, turned inside out and 
scribbled over so many times by the McCain campaign that it is hardly 
recognizable amid the clutter, but the fact remains: Obama's plan would 
grant tax cuts to all Americans making less than $226,982 per year, with 
the largest cuts going to the poorest individuals. Only the wealthiest 
0.1 percent of earners would have to pay more.

    McCain's plan, in contrast, would decrease taxes for all, but the 
largest decreases would go to the highest-earning bracket of taxpayers, 
as well as to corporations. The lowest-income Americans would benefit 
the least from McCain's tax cuts, with only a 0.2 percent decrease. 
They'd get a 5.5 percent tax cut under Obama's plan.

    Since most Americans do not make more than $226,982, most Americans 
would receive a larger tax cut if Obama became president, according to a 
recent study by the nonpartisan Tax Policy Center that compared the two 
proposals.

    Additionally, under Obama's plan, low-earning seniors would pay no 
income tax at all.

    *McCain-onomics*

    Despite McCain's self-promoted image as a "maverick" and innovator, 
his tax policy appears to be driven by the same motivations as his GOP 
forebears, according to Jonah Gelbach, a University of Arizona economics 
professor who has written extensively on the presidential campaign.


(Graphic: The Washington Post)


    "McCain has signed on to the Republican Party's generation-long view 
that the rich just aren't rich enough," Gelbach told Truthout.

    The McCain campaign holds that padding wealthy (and corporate) 
pocketbooks is the best type of economic stimulus. Under this logic, tax 
cuts for the highest earners encourage those individuals to give more 
back to the economy - starting new enterprises, expanding their 
businesses and spending more cash.

    "Entrepreneurs are at the heart of American innovation, growth and 
prosperity," the campaign's platform states. "Entrepreneurs create the 
ultimate job security - a new, better opportunity if your current job 
goes away. Entrepreneurs should not be taxed into submission."

    Yet Gelbach points to the fact that tax rates are lower now than 
they were during the Clinton era, a period which, despite the warnings 
of conservative doomsayers, proved prosperous.

    Moreover, small-town, working-class "values voters" - key Republican 
targets - would gain little from McCain's plan, according to Gelbach. 
Hefty tax cuts for the rich would eventually need to be balanced out, 
either by increasing taxes for lower-income brackets or by slashing 
spending. Given the McCain campaign's commitment to a large military 
presence abroad, funding cuts would likely affect the domestic programs 
that provide assistance to working-class Americans.

    Stanford professor Myron Scholes, the 1997 Nobel Prize winner in 
economics, lauds McCain's emphasis on slashing taxes. Speaking to 
reporters at a late August conference, he called Obama's plan a "policy 
of redistribution." However, he noted, a McCain presidency would likely 
see an uphill battle on taxes.

    "All things being equal, we'll probably have a Democratic Congress," 
Scholes said. "So McCain can say he wants to produce lots of different 
tax cuts, but it'll be hard to get that through."

    *Obama's Fairness Doctrine*

    Like McCain's, Obama's economic plan claims the "tax relief" mantra. 
However, instead of adhering to trickle-down logic, it focuses on the 
middle class.

    "Obama will restore fairness to the tax code and provide 150 million 
workers the tax relief they need," his platform states. After tax 
credits, 10 million Americans would pay no income tax at all.

    "Restoring fairness" means substantially cutting taxes for lower 
earners and raising them for the super-wealthy. But it also means a 
whole range of programs to even up access to health care, education and 
housing. Obama's proposal would reduce insurance costs across the board 
and offer tax credits to employees who buy insurance. It would also add 
a $4,000 tax credit for families to send their kids to college.

    The conservative Heritage Foundation released a memo in June linking 
the Obama plan to "European levels of taxation," calling it a "return to 
the bad old days" of the Carter administration and accusing it of 
"raising taxes on the successful." The question for voters then becomes 
a personal and philosophical one: to what extent should the wealthy be 
asked to give back to their country and community?

    The 95 percent of working families that would receive a tax cut 
under an Obama administration might come up with a different answer than 
the Heritage Foundation.

    *War and Taxes*

    One factor that the McCain campaign doesn't emphasize is exactly 
where the tax dollars that /are/ collected will be going. Though 
McCain's plan drastically reduces taxes, it doesn't reduce the amount of 
money allotted to one of the most expensive government endeavors: the 
Iraq war.

    The Obama campaign's Brian Deese recently told the Chicago Sun-Times 
that comparisons of the two candidates' economic plans don't "count the 
impact of current Iraq war spending," adding that "if McCain's plan 
drives the deficit up and puts upward pressure on interest rates, that 
increases costs for families and could force really Draconian, 
across-the-board spending cuts."

    By straightforward logic, a substantial withdrawal of troops from 
Iraq, as proposed by Obama, would ease the burden that status-quo 
military policies have placed on taxpayers, according to Gelbach.

    "Getting out of Iraq faster will certainly reduce the present value 
of federal tax dollars necessary to raise, unless you think that getting 
out will make things worse and force us back in an even more expensive 
capacity," Gelbach said. "McCain has at various times made arguments to 
this effect, but his record on Iraq judgment has not exactly been 
stellar.... McCain's campaign has tried to claim they can count on 
military savings from leaving Iraq, even as he has both endorsed in 
principle a 100-year US presence and refused to sign on to the timeline 
that the Maliki government is now working out with the Bush 
administration. He has repeatedly said we will leave only with victory, 
yet he has refused to define 'victory.'" Thus, it is hard for an 
objective observer to determine exactly when or under what conditions 
McCain would actually leave Iraq. And the cost of our presence in Iraq - 
whether in full-on combat role or otherwise - would ultimately have to 
be paid with actual tax dollars."

    According to the recent Tax Policy Center study, both candidates' 
plans would increase the national debt. However, Obama wins here on the 
fiscal conservation front: McCain's proposal would cost the Treasury 
$3.7 trillion, while Obama's would cash in at $2.7 trillion.

    The power of the purse ultimately rests with Congress, and neither 
candidate would be able to singlehandedly change the course of economic 
policy upon taking office. Still, when it comes to taxes, Obama and 
McCain would guide the country in sharply different directions.

    Looking past the McCain campaign's misleading rhetoric and 
convoluted logic, the problem boils down to this: Who should be first in 
line for tax relief: the rich or the poor? It's no secret where each 
candidate's priorities lie.

» <http://www.truthout.org/articles/by-author/34002>

------------------------------------------------------------------------

Maya Schenwar <mailto:maya at truthout.org> is an editor and reporter for 
Truthout.


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