Voters weighing Obama, McCain tax plans

The report concludes that both Obama and McCain appear set to follow President Bush in this respect: increasing the national debt.

Americans want balance

Surveys of public opinion suggest Americans want balance – not as in “balanced budget” but in a blending of goals.

Most see the income tax they pay currently as fair. But in January, an NBC/Wall Street Journal poll found the public split over whether those tax cuts have been “worth it,” since economic gains were offset by a rising federal deficit. And an April Gallup poll found strong support for tax hikes on upper-income Americans.

Jere Smith, who owns a Kansas City auto-repair business along with her husband, reflects some of America’s mixed feelings.

“You’ve paid student loans and worked hard,” she says. “Any tax that’s going to penalize us because we make more money than someone who didn’t has always kind of bothered me.”

At the same time, she complains that big corporations “have gotten way out of hand” and don’t deserve the additional tax cut that McCain is urging.

Economists, for their part, offer no clear consensus on where tax policy should head. They note that there’s no magic rule saying that governments should balance their budgets. But on one big point a consensus exists: It’s bad if the national debt grows too large – and if it keeps growing faster than the gross domestic product (GDP). That’s exactly what looms ahead, though not immediately.

McCain takes supply-side approach

McCain approaches fiscal policy squarely from the supply-side tradition: Cut taxes to encourage more economic activity, more supply of goods and services.

He wants to maintain the Bush tax cuts largely as they exist. Instead of repealing the estate tax, he would reduce it to 15 percent. The deduction taxpayers get for each dependent in the household (currently $3,500) would gradually double. He would cut the corporate tax rate from 35 to 25 percent, with the goal of bringing the US into line with other developed nations.

McCain says he’ll reduce spending below current forecasts with a tough review of all budget items and the elimination of earmarks that lone lawmakers insert into spending bills.

“Senator McCain’s economic policies were all designed and set up for one reason – to create jobs” in the private sector, says Taylor Griffin, a campaign spokesman on the economy. Lower taxes won’t “pay for” the tax cuts, but a positive “feedback” on the economy should cause federal revenues to come in better than traditional models forecast, the McCain camp believes.

On spending, “there’s a lot of fat to cut,” Mr. Griffin says. McCain promises to balance the budget by 2013. But his campaign has not specified the needed spending cuts.
Obama would also maintain Bush income-tax rates on the vast majority of the population. For households making $250,000 or more, the marginal tax rate would return to late 1990s levels – as high as 39.6 percent. The estate tax would stay at its current rate of 45 percent, with a lower exemption amount than under McCain. The capital gains tax would rise to 20 percent for many investors.

Previous

1 | 2 | 3 | 4 | 5

Next