Preliminary Analysis of the 2008 Presidential Candidates' Tax Plans

[Bronco_Beerslug]

Here's a good snapshot of initial plans...

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A Preliminary Analysis of the 2008 Presidential Candidates' Tax Plans (http://www.taxpolicycenter.org/publications/url.cfm?ID=411693)

Author(s): The Tax Policy Center

Availability: PDF | Printer-Friendly Version

Published: June 11, 2008

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

The text below is an excerpt from the complete document. Read the full report in PDF format.
Abstract

Tax and fiscal policy will loom large in the next president's domestic policy agenda. Nearly all of the tax cuts enacted since 2001 expire at the end of 2010 and the individual alternative minimum tax (AMT) threatens to ensnare tens of millions of Americans. While a permanent fix palatable to both political parties has proven elusive, both candidates have proposed major tax changes. This report describes how we performed our modeling and analysis, outlines the major tax proposals, and discusses the implications of their policies for the revenue raised, taxpayer economic activity, and the distribution of the tax burden.
Introduction

Fundamental reform of our tax system is one way to resolve these problems, but because reform creates both winners and losers, the leading presidential candidates have not addressed it seriously. Nonetheless, both candidates have proposed major changes to the nation's tax laws. Senator McCain would permanently extend the 2001 and 2003 tax cuts, increase deductions for taxpayers supporting dependents, reduce the corporate income tax rate, and allow immediate deductions for the cost of certain short-lived capital equipment. Senator Obama would permanently extend certain provisions of the 2001 and 2003 tax cuts primarily affecting taxpayers with incomes under $250,000; increase the maximum rate on capital gains and qualified dividends; and enact new and expanded targeted tax breaks for workers, retirees, homeowners, savers, students, and new farmers. Senator McCain proposes to extend permanently the AMT "patch" that has prevented most individuals and families with incomes below $200,000 from being affected by the tax, and in our interpretation of his proposal, Senator Obama would do the same. Each candidate would also increase the estate tax exemption and reduce the estate tax rate compared with current law in 2011 and beyond, although Senator McCain would cut the tax much more than Senator Obama. Finally, each candidate promises to broaden the tax base and reduce corporate loopholes. McCain lists eight breaks for oil companies as targets but, other than that, is short on details for his pledge to eliminate "corporate welfare." Obama identifies a variety of steps, including basis reporting for capital gains, taxing carried interest as ordinary income, and enacting sanctions on international tax havens that don't cooperate with enforcement efforts, but he would also need additional as-yet-unspecified policies to achieve his revenue target for base broadening.

Although both candidates have at times stressed fiscal responsibility, their specific non-health tax proposals would reduce tax revenues by $3.7 trillion (McCain) and $2.7 trillion (Obama) over the next 10 years, or approximately 10 and 7 percent of the revenues scheduled for collection under current law, respectively. Furthermore, as in the case of President Bush's tax cuts, the true cost of McCain's policies may be masked by phase-ins and sunsets (scheduled expiration dates) that reduce the estimated revenue costs. If his policies were fully phased in and permanent, the ten-year cost would rise to $4.1 trillion, or about 11 percent of total revenues. Both candidates argue that their proposals should be scored against a "current policy" baseline instead of current law. Such a baseline assumes that the 2001 and 2003 tax cuts would be extended and the AMT patch made permanent. Against current policy, Senator Obama's proposals would raise $700 billion, an increase of 2 percent, and Senator McCain's proposals lose $600 billion, a decrease of roughly 2 percent. Senator McCain has stressed that deficits should be closed by spending cuts, but policies he identifies, such as limiting earmarks, would offset only part of the revenue losses attributable to his tax plan. As noted, both candidates may be overoptimistic in their revenue targets for closing tax loopholes-Obama probably more than McCain.

The two candidates' plans would have sharply different distributional effects. Senator McCain's tax cuts would primarily benefit those with very high incomes, almost all of whom would receive large tax cuts that would, on average, raise their after-tax incomes by more than twice the average for all households. Many fewer households at the bottom of the income distribution would get tax cuts and those whose taxes fall would, on average, see their after-tax income rise much less. In marked contrast, Senator Obama offers much larger tax breaks to low- and middle-income taxpayers and would increase taxes on high-income taxpayers. The largest tax cuts, as a share of income, would go to those at the bottom of the income distribution, while taxpayers with the highest income would see their taxes rise.

The impact of the tax code on economic activity under each candidate's policies would differ in several important ways. With Senator McCain's proposed policies enacted, the top marginal rates (35 percent on individual income and 25 percent on corporate income) would be significantly lower than under Senator Obama's plan (39.6 and 35 percent, respectively). McCain's reduced individual and corporate rates would improve economic efficiency and increase domestic investment, but the larger deficits he would incur to do so would reduce and could completely offset any positive effect. In contrast, Senator Obama's proposed new tax credits could encourage desirable behavior, particularly if the childless EITC and payroll tax rebate encourage additional labor supply among childless low-income individuals. However, he would also direct new subsidies at an already favored group-seniors -and an already favored activity-borrowing for housing-which could probably be better directed elsewhere.

Both candidates have proposed to change the tax treatment of health insurance in important ways. This analysis does not address those proposals, but we expect to evaluate both plans soon.

Section I of the report describes how we obtained information about the candidates' tax plans and how we performed our modeling and analysis. In section II, we outline the major tax proposals put forth, and in section III, we discuss the implications of their policies for the revenue raised and taxpayer economic activity. Section IV looks at their effect on the distribution of the tax burden.

(End of excerpt. The full report is available in PDF format.)

[Bronco_Beerslug]

No comments from McCain supporters?

[Bronco_Beerslug]

Still no comments from the right?

[Bronco_Beerslug]

Well, how about that, post some financial facts about both candidates and no response from the right here. I thought Obama was going to bring down the economy from listening to the resident right wingers here?

[cutthemdown]

I don't have much of a problem with the tax structure Obama has proposed. Him keeping the payroll tax to only people over 250 grand and the tax cuts he proposes sound ok to me. The problem I have is that no way he can pay for healthcare and save social security like that. He would need way more revenue for that. At some point Obama springs his real tax plan, after he's elected.

[Odysseus]

Um. Yeah. Obama's real tax plan would actually INCLUDE conversations with all American rather than deciding FOR Americans what they should have. Hillary wants to tell us the direction. McCain wants to tell us the direction. Obama actually asks the question and then gets attacked for doing that?

We are a nation of ideas. That is our strong suit. We have lost the "political will" to do the things that need to be done across the board for all Americans. We need to get control of the media and stop letting them think FOR us. Americans are like sheep lately and very little seems to disturb them. The two party system finally provides something outside the two party system and yet people insist on lying about it. Why?

Bush clearly had an oil agenda going into the White House and McCain is clearly in the pocket of big Oil Money. Obama tells you what he is going to do. Attack him on that. McCain is clearly tied to big oil money. Explain that.

[enjolras]

I don't have much of a problem with the tax structure Obama has proposed. Him keeping the payroll tax to only people over 250 grand and the tax cuts he proposes sound ok to me. The problem I have is that no way he can pay for healthcare and save social security like that. He would need way more revenue for that. At some point Obama springs his real tax plan, after he's elected.

That's the cold hard reality undercutting all of this tho isn't it? There is no tax plan, proposed by anyone, that pays for all of that. Social Security is still an issue we're deferring to future us...

Its also why you won't see national healthcare under Obama, we really have no way to pay for it not matter how good his intentions are. If he can successfully disengage us from Iraq at least we'll be in a position to begin to blanace our budget. Still not going to pay for healthcare, however.

Intentions are going to meet reality under both plans (as they usually do).

[cutthemdown]

That's the cold hard reality undercutting all of this tho isn't it? There is no tax plan, proposed by anyone, that pays for all of that. Social Security is still an issue we're deferring to future us...

Its also why you won't see national healthcare under Obama, we really have no way to pay for it not matter how good his intentions are. If he can successfully disengage us from Iraq at least we'll be in a position to begin to blanace our budget. Still not going to pay for healthcare, however.

Intentions are going to meet reality under both plans (as they usually do).

I agree totally. McCains plan for social security is, well, he doesn't have one. Obamas plan falls far short when you add it up. Truth is govt may not want to tell us there is no plan that will add up.

[Taco John]

There's a plan that will add up. The plan just involves stopping our imperialist/militaristic expansion of the world, and using that money to make up our domestic shortfall.

[Play2win]

Its not that I am against Nation Building, its just that I want it to be OUR Nation that we Build.

[cutthemdown]

Its not that I am against Nation Building, its just that I want it to be OUR Nation that we Build.

Check out the Global Poverty Bill then

[Tombstone RJ]

No comments from McCain supporters?

I don't like the fact that Obama is increasing capital gains taxes. That is assinine IMO. McCain, at the very least, is not raising capital gains, and has stated that he'd like to drop the capital gains tax from 30% to 25%.

[Tombstone RJ]

Um. Yeah. Obama's real tax plan would actually INCLUDE conversations with all American rather than deciding FOR Americans what they should have. Hillary wants to tell us the direction. McCain wants to tell us the direction. Obama actually asks the question and then gets attacked for doing that?

We are a nation of ideas. That is our strong suit. We have lost the "political will" to do the things that need to be done across the board for all Americans. We need to get control of the media and stop letting them think FOR us. Americans are like sheep lately and very little seems to disturb them. The two party system finally provides something outside the two party system and yet people insist on lying about it. Why?

Bush clearly had an oil agenda going into the White House and McCain is clearly in the pocket of big Oil Money. Obama tells you what he is going to do. Attack him on that. McCain is clearly tied to big oil money. Explain that.

Actually, I'd like to know why you think McCain is tied to "big oil money." You need to explain that first.

[TailgateNut]

For all of you who bitch about increased taxes.

How do you propose to pay for Bushs' "credit card bill" aka the "Iraq blunder".

[Tombstone RJ]

For all of you who b**** about increased taxes.

How do you propose to pay for Bushs' "credit card bill" aka the "Iraq blunder".

At this point, it's gonna be paid for by the same money that is paying for the war on terrorism.

Most of the fed gov's money is going to support SS. That is the real problem. Yours and mine tax money is going to the retirement fund of the baby boomer's generation. There is no easy way of fixing that hell-hole of a problem, and any politician who tries gets fried.

But, that is where a huge chunk of the federal gov.'s tax money goes to. And, SS is not supposed to work like that.

When the fed gov tax money out of your pay check to pay for your retirement (your SS money) it is actually going to the people who are getting their SS checks now. The work force is shrinking, the retirement community is growing, in essence, the money is shrinking to pay the retirement funds current SS collectors. So, the money you think is going to your eventualy retirement is not there, it's already spent.

Its a mess.

[Bronco Jamus]

No comments from McCain supporters?

McCain or Obama doesn't vote on tax cuts. Congress does. I am more concerned with what they'll pass and hand to the President to sign.

[Bronco_Beerslug]

McCain or Obama doesn't vote on tax cuts. Congress does. I am more concerned with what they'll pass and hand to the President to sign. Uh, the last one was called "Bush's tax cuts" for a reason, wanna guess why? And yes, the president gets the final vote.

[Play2win]

This place is hilarious... A bunch of (little) kids with cookie crumbs all over their faces and and smeared chocolate all over their hands, telling mothers and fathers that they are pure, and only eat nutritious, wholesome, healthy foods, and would never, Never, NEVER have their hands in the cookie jar...


Anytime there is a tax increase in the foreseeable future, blame BUSH. He is the SOURCE for all the tax increases. Without HIS war, there wouldn't be tax increases on working America and working Americans. So next time you b**** about taking more money out of YOUR paycheck, blame BUSH. He caused it, it is his fault. Without HIS WAR, the U.S. would have billions upon billions more dollars at its disposal. That is where the money has gone... and that is where YOUR tax is going to be coming from...


But its okay, kids, stick you grubby little hands back into that cookie jar!!!

[Bronco_Beerslug]

This place is hilarious... A bunch of (little) kids with cookie crumbs all over their faces and and smeared chocolate all over their hands, telling mothers and fathers that they are pure, and only eat nutritious, wholesome, healthy foods, and would never, Never, NEVER have their hands in the cookie jar...


Anytime there is a tax increase in the foreseeable future, blame BUSH. He is the SOURCE for all the tax increases. Without HIS war, there wouldn't be tax increases on working America and working Americans. So next time you b**** about taking more money out of YOUR paycheck, blame BUSH. He caused it, it is his fault. Without HIS WAR, the U.S. would have billions upon billions more dollars at its disposal. That is where the money has gone... and that is where YOUR tax is going to be coming from...


But its okay, kids, stick you grubby little hands back into that cookie jar!!!This topic kinda went over your head, eh?

[Bronco_Beerslug]

At this point, it's gonna be paid for by the same money that is paying for the war on terrorism.

Most of the fed gov's money is going to support SS. That is the real problem. Yours and mine tax money is going to the retirement fund of the baby boomer's generation. There is no easy way of fixing that hell-hole of a problem, and any politician who tries gets fried.

But, that is where a huge chunk of the federal gov.'s tax money goes to. And, SS is not supposed to work like that.

When the fed gov tax money out of your pay check to pay for your retirement (your SS money) it is actually going to the people who are getting their SS checks now. The work force is shrinking, the retirement community is growing, in essence, the money is shrinking to pay the retirement funds current SS collectors. So, the money you think is going to your eventualy retirement is not there, it's already spent.

Its a mess.That's exactly how it is suppose to work (tax money for funds for people now and in the future). The way it isn't suppose to work is government taking that money to fund invasions and occupation of foreign countries, etc...

[Play2win]

This topic kinda went over your head, eh?

Hardly... I think you are a little confused about who is in agreement with you and who is not...

Actually most of of the thread is pretty commonplace.





It is more of the "Same as it ever was..." here at the mane.


"I am right, because, I am right, because... oh, yeah... I AM RIGHT!!!"

I am sure everyone here is more right about everything than everybody else on this whole planet...



BUT... Carry on with Y'er BAD Selves...


Now I think I will go do something a little more worthwhile with my time, like watch grass grow...


sywwtby...

[spdirty]

One thing I hate is the stupid ****ing line "how are we gonna pay for those tax cuts?" That is the most arrogant ****ing line there is. Its like saying "how will you pay for a pay cut at your job?" You do it by SPENDING LESS ****ING MONEY!!!!!!!!!!!!!!

Budget has ballooned to 3 trillion dollars. I bet you could cut at least half of that shlt with all the fat. You cut that hog in half, and in 1 year we no longer have a deficit. How about this for a solution? Stop paying for all the services that the illegals get! Don't build more jails, rather build tents for the **********s. Don't build more bullshlt bridges in Alaska. Or anywhere for that matter.

And hey, mr. panties permanently stuck in your crotch, how about we pay for the Iraqi "blunder" by taking their oil? Rather than the idiotic false slogan "war for oil" we reverse it to say "oil for war." Unless you have a better solution, I'd like to hear it, rather than hear nothing but your constant bltching all the time. And "pull out now", dude, don't be ****ing stupid. If we had a real leader, well, I'd say they owe us at least 500 billion. They will not give it to us unless we take it. Get what we are owed, then pull out.

None of those suggestions have a real shot though, because in idiot land (DC)its campaign season 24/7/365 and any suggestion or idea viewed as not compassionate or politically incorrect gets shot down right away. Unless a demoncat suggests it.

[cutthemdown]

Obama's tax plan don't sound all that bad to me. What I don't understand though is how Obama expects that plan he has presented to have enough for all his liberal social programs. If Obama can do what he has promised and not raise my taxes more then he has said he will then he will be a great president.

[L.A. BRONCOS FAN]

And the moral of the story is...

http://www.bartcop.com/friends-vote.jpg

[L.A. BRONCOS FAN]

Anytime there is a tax increase in the foreseeable future, blame BUSH. He is the SOURCE for all the tax increases. Without HIS war, there wouldn't be tax increases on working America and working Americans. So next time you b**** about taking more money out of YOUR paycheck, blame BUSH. He caused it, it is his fault. Without HIS WAR, the U.S. would have billions upon billions more dollars at its disposal. That is where the money has gone... and that is where YOUR tax is going to be coming from...


This is exactly the kind of thing Republicans are hoping you will forget between now and November.

[Bronco_Beerslug]

Hardly... I think you are a little confused about who is in agreement with you and who is not...
Uh, no you missed the topic of this thread once again. All that nonsensical stuff you posted has nothing to do with the financial positions of the two candidates (the topic of this thread). Your left field ranting isn't really very coherent so I can't be sure what point you are trying to make, if you even have one.

[Tombstone RJ]

That's exactly how it is suppose to work (tax money for funds for people now and in the future). The way it isn't suppose to work is government taking that money to fund invasions and occupation of foreign countries, etc...

Uh, no, that is not how your SS tax money is supposed to work. That is never what FDR intended when he set it up.

The money that is taken out of your's and my pay check is supposed to go to OUR RETIRMENT. It's not supposed to go into the pockets of the people who are currently retired. It's a SAVINGS FUND. If you don't understand what a savings is, you probable don't understand how the SS system was intended to work.

But, as it happens, the money for our retirement is now being spent on sending out SS checks to people retired today. That check your mom or dad is getting is not the money they put into SS years ago (that money has been spent), it's money your putting into SS.

Can you see the problem here? If not, let me explain:

After WWII, soldiers got back from war, the economy was good, and people started having kids at an unprecedented rate. The Baby Boomer generation was born.

But, now all those Baby Boomers are retiring and guess what, they are collecting on their SS money. Problem is, there are way more retirees than what the system can handle, so money is coming out of yours and my payroll checks.

Also, there is a much bigger problem. Our current work force doesn't have enough people to fund the retirees. Yep, we are barrowing money to pay the current group of retired people.

Hmmm... yah, that is a big, big, big, big problem.

[Bronco_Beerslug]

Uh, no, that is not how your SS tax money is supposed to work. That is never what FDR intended when he set it up.
The money that is taken out of your's and my pay check is supposed to go to OUR RETIRMENT. It's not supposed to go into the pockets of the people who are currently retired. It's a SAVINGS FUND. If you don't understand what a savings is, you probable don't understand how the SS system was intended to work..Please, it is you that apparently doesn't know the history of SS. Survivor benefits, spouse and children benefits were added in the 1930s and disability benefits were added in the 1950s. As of 2005, SS has taken in 10.8 trillion and paid out 8.8 trillion.

If government didn't "borrow" that money there wouldn't be any problem paying benefits for years and years to come.


Did President Franklin Roosevelt make a set of promises about Social Security, which have now been violated?
MYTHS AND MISINFORMATION ABOUT SOCIAL SECURITY (http://www.ssa.gov/history/InternetMyths.html)

[Tombstone RJ]

Please, it is you that apparently doesn't know the history of SS. Survivor benefits, spouse and children benefits were added in the 1930s and disability benefits were added in the 1950s. As of 2005, SS has taken in 10.8 trillion and paid out 8.8 trillion.

If government didn't "borrow" that money there wouldn't be any problem paying benefits for years and years to come.


Did President Franklin Roosevelt make a set of promises about Social Security, which have now been violated?
MYTHS AND MISINFORMATION ABOUT SOCIAL SECURITY (http://www.ssa.gov/history/InternetMyths.html)

So, where is the other 2 trillion going? If there is an extra 2 trillion dollars just laying around, why raise taxes? Why not invest that money and then use the $ made off interest to help fund public works?

The retirement generation is out growing the working population.

[Bronco_Beerslug]

So, where is the other 2 trillion going? If there is an extra 2 trillion dollars just laying around, why raise taxes? Why not invest that money and then use the $ made off interest to help fund public works?
It's not an "extra" 2 trillion. It's money paid in and collecting interest. And you don't use SS funds to for public works. Learn more here (http://www.ssa.gov/history/hfaq.html)...

By law, the assets of the Social Security program must be invested in securities guaranteed as to both principal and interest. The Trust Funds hold a mix of short-term and long-term government bonds. The Trust Funds can hold both regular Treasury securities and "special obligation" securities issued only to federal trust funds. In practice, most of the securities in the Social Security Trust Funds are of the "special obligation" type.

[Tombstone RJ]

It's not an "extra" 2 trillion. It's money paid in and collecting interest. And you don't use SS funds to for public works. Learn more here (http://www.ssa.gov/history/hfaq.html)...

It's still conclusive that the retirement community is out growing the working community and that is either bankrupting the system, or will soon bankrupt the system.

Social Security is the single biggest drain on federal tax dollars:

I hear that Social Security has a big financial problem? Why?


Social Security's financing problems are long term and will not affect today's retirees and near-retirees for many years, but they are very large and serious. People are living longer, the first baby boomers are nearing retirement, and the birth rate is lower than in the past. The result is that the worker-to-beneficiary ratio has fallen from 16.5-to-1 in 1950 to 3.3-to-1 today. Within 40 years it will be 2-to-1. At this ratio there will not be enough workers to pay scheduled benefits at current tax rates.


What will happen if Social Security is not changed?


If Social Security is not changed, then by about 2041 payroll taxes will have to be increased, the benefits of today's younger workers will have to be cut, or some other source of revenue, like transfers from general revenues, will be required. Social Security's Trustees state, "If no action were taken until the combined trust funds become exhausted in 2041, then the effects of changes would be more concentrated on fewer years. For example, payroll taxes could be raised to finance scheduled benefits fully in every year starting in 2041. In this case, the payroll tax would be increased to 15.94 percent at the point of trust fund exhaustion in 2041 and continue rising to 16.60 percent in 2082. Similarly, benefits could be reduced to the level that is payable with scheduled tax rates in every year beginning in 2041. Under this scenario, benefits would be reduced 22 percent at the point of trust fund exhaustion in 2041, with reductions reaching 25 percent in 2082.” See the 2008 Trustees Report.


How big is the future problem?


Social Security is not sustainable at currently scheduled levels over the long term with current tax rates without large infusions of additional revenue. There will be a growing shortfall once the trust fund reserves are exhausted in 2041.

Social Security's Chief Actuary projects that in present-value dollars the financial shortfall (or unfunded obligation) for the 75-year period is $4.3 trillion. This unfunded obligation is equal to 1.6 percent of the taxable earnings or 0.6 percent of the nation’s gross domestic product (GDP) over the next 75 years.

See the 2008 Trustees Report.


If Social Security's financial problem is so long term (negative cash flows not until 2017 and trust fund exhaustion in 2041), why do we need to fix it now?


Addressing the problem now allows the burden of reform to be spread over more generations, and gives younger people more time to adjust their own retirement planning decisions. As the Trustees of Social Security, the Comptroller General of the United States and the Chairman of the Federal Reserve Board have said, the sooner we address the problem, the smaller and less abrupt the changes will be. The independent, bipartisan Social Security Advisory Board has said: "As time goes by, the size of the Social Security problem grows, and the choices available to fix it become more limited." Addressing the problem now will allow today's younger workers planning for their retirement to have a better assurance of the future of Social Security.

[Bronco_Beerslug]

It's still conclusive that the retirement community is out growing the working community and that is either bankrupting the system, or will soon bankrupt the system.
Medicare is the more pressing and larger problem now.