NCPA - National Center for Policy Analysis


October 27, 2008

Sen. John McCain (R-Ariz.) favors broad-based tax cuts -- including an extension of the large tax cuts enacted early in the Bush administration.  The McCain campaign, like every Republican presidential campaign since Ronald Reagan's, argues that broad tax cuts will help get the economy back on track, create more new jobs and help taxpayers at all economic levels.

Sen. Barack Obama (D-Ill.) has proposed targeting tax cuts to people at the lower end of the economic ladder, and letting tax cuts expire for individuals making more than $200,000 a year and couples making more than $250,000. The Democrat's campaign argues that tax cuts for the wealthy have failed to benefit middle- and lower-income workers, who have seen their wages stagnate since the recession of 2001.

  • Wealthy taxpayers would fare better under McCain's tax plan, which would leave the top tax bracket for individuals at the current 35 percent.
  • McCain would cut the corporate tax rate from the current 35 percent to 25 percent.
  • Obama has said he would raise that top bracket to 39.6 percent and raise the current 33 percent bracket to 36 percent.
  • Obama says he will cut corporate taxes but doesn't cite a rate; but he also says he'll close loopholes -- which would raise taxes for some corporations.
  • McCain also wants to double the current $3,500 per-child exemption to $7,000 by 2016.

McCain argues that Obama's plan would "convert the IRS into a giant welfare agency, redistributing massive amounts of wealth at the direction of politicians in Washington."

A central question of the debate is whether the tax system should become more or less "progressive." That is, should those with higher incomes pay a bigger share of their earnings in taxes?  Despite the Bush administrations tax cuts to the wealthy, the system has been moving in that direction since 2001, according to Pamela Villarreal of the National Center for Policy Analysis.

"The wealthy pay a greater share of the tax burden than they did in 2000, and lower-income people paid less of it than they ever had," she said.  "The bottom 50 percent now pays less than 3 percent of all federal taxes, where the top 1 percent pays almost 40 percent."

Source: John W. Schoen, "High price may thwart tax cut plans; Both McCain, Obama proposals face steep obstacles as deficits swell,", October 24, 2008.

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