Published: September 06, 2008 12:22 am      

Comparing the McCain and Obama tax plans

EDMOND — Now that the political conventions have ended it is official, the next president will be either Barack Obama or John McCain. During the next two months we will hear a lot about these two candidates, but few issues better illustrate the differences in these two candidates than their tax plans.

The non-partisan Tax Policy Center recently released an analysis of the tax plans proposed by the two presidential candidates, and the differences are striking. Of the two, McCain is clearly the larger tax cutter. The TPC estimates that the McCain tax plan will reduce tax revenues by more than $4.1 trillion during the next 10 years compared to current law, while Obama’s tax cuts total $2.9 trillion during the next 10 years.

But what is most striking is how the candidates differ on the distribution of the tax cuts. The Obama plan provides the greatest tax cuts to middle- and lower-income families, while raising taxes on the wealthiest families. On the other hand the McCain plan cuts taxes for everyone but provides its greatest benefits to the wealthiest families. Interestingly though, according to the TPC analysis the Obama plan provides greater tax relief to 80 percent of Americans than the McCain plan does.

The TPC estimates that taxpayers in the middle income quintile (those in the 40th-60th percentile) would see their after-tax income increase by more than 4 percent under the Obama plan ($2,000 for a family earning $50,000). However, under the McCain plan, those same households would see their after-tax income rise by only 3 percent ($1,500 for a family earning $50,000), meaning the Obama plan offers the largest tax cuts for middle-class families.

For the wealthiest Americans though, the story is reversed. Under the McCain plan the highest earning Americans (those in the top 1 percent) would see their after tax income rise by a whopping 10 percent. However, under the Obama plan these same people will see their after tax income decrease by 1 percent. Clearly, the McCain plan benefits the highest-earning Americans more.

Now some might argue that it is unfair for Obama to propose cutting taxes for 80 percent of the population and to raise taxes on the highest earning 20 percent. Of course, some also might argue that it is unfair that the McCain plan would raise the after tax income of the richest Americans by 10 percent while raising the after tax incomes of middle-class Americans by only 3 percent. The fairness of the plans is subjective. But what is not open for debate is that the Obama plan would provide the greatest tax relief to middle-class families, while the McCain plan provides the greatest tax relief to the wealthiest families.

In the next two months American voters will decide which candidate they prefer. Along the way we will need to consider many important issues, including Iraq, the economy, energy policy and climate change. But if this election comes down to which candidate will provide the greatest tax relief to the greatest number of Americans, then the Tax Policy Center analysis indicates that Obama will be the next president of the United States.

MICKEY HEPNER is an associate professor of economics at the University of Central Oklahoma.