Comparing the Economic Plans of McCain and Obama

There has been much accusation flying back and forth between presidential campaigns regarding economic plans. I'm hearing a lot about how the other guy will raise your taxes. Who to believe? I don't put much stock in ads, so best go to the source, I say. The Urban Institute Brookings Institution Tax Policy Center has taken a hard look at the plans put forth by Senators McCain and Obama, and offered a detailed analysis of how each. If you want to read the whole thing, click here for pdf, or here for html version. It's kind of a dry read, so I'll just share a few tidbits, that I feel are important:

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.

Being as my family would fall into the "middle-income" bracket, you can probably guess whose plan I find more attractive.

There is some common ground between the two plans. Both candidates agree that the elements of the 2001 and 2003 tax cuts primarily affecting those with incomes below $250,000 should be extended, that the estate tax should be substantially reduced but not repealed, and that the research credit should be made permanent (though Senator McCain would change the formula by which it is calculated). Both candidates would continue to limit the number of taxpayers affected by the AMT but would not repeal it.

However, the differences between the candidates’ plans are large. For one thing, both have a back-to-the-future look to them—McCain continues major themes of the Bush administration (lower marginal tax rates, low taxes on capital) while Obama follows the Clinton administration approach of expanding targeted tax breaks for social policy objectives and introducing new tax breaks. Their distributional impacts differ greatly as well: Senator McCain’s plan gives the largest tax cuts taxes to high-income taxpayers, while Senator Obama’s plan directs the largest cuts toward lower-income taxpayers.

What I find disconcerting is that according to their analysis, both plans will see an increase in the deficit, and I hope that there will be some re-tooling to make deficit reduction a bigger priority.
Something to consider when you go to the voting booth. In researching all of this, I discovered a new blog I'm adding to my favorites called Economistmom. Check it out!