here's the truth about both candaites
July 9, 2008 | As gas and food prices soar and job losses mount, John McCain launched a new effort this week to reassure Americans that he has a plan to bring back economic growth. McCain spoke at a town-hall event in Denver Monday and will travel to the swing states of Ohio and Pennsylvania on Wednesday and Michigan and Wisconsin on Thursday and Friday to spread his economic message.
The economy has vaulted past Iraq and terrorism as the most pressing concern on voters' minds this election season, and both McCain and Barack Obama are trying to show they feel voters' pain. McCain has called for help for those facing mortgage foreclosures and has pledged to balance the federal budget by 2013. But the centerpiece of his economic plan is a tax-cut proposal more sweeping than anything envisioned by George W. Bush.
"The choice in this election is stark and simple," McCain said at the Denver town hall. "Senator Obama will raise your taxes. I won't. I will cut them where I can."
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But according to a respected, independent group of tax-policy experts, McCain’s plan would balloon the deficit and provide a windfall to the wealthy while affording only nominal relief to middle-class taxpayers. McCain has moved toward the Republican base on a handful of issues this campaign season, but his tax plan might actually shift the erstwhile deficit hawk to the right of the current president.
A 2004 study by the Congressional Budget Office found a full third of Bush's controversial 2001 and 2003 tax cuts went to the top 1 percent of earners. McCain's tax cuts would be more massive than Bush's, and appear to skew even more to the wealthy. President Bush touted his breaks as providing a boost for the economy, but some tax-policy experts credit Bush's tax policy with shifting the tax burden to the middle class, ballooning budget deficits, and contributing to a widening disparity in personal wealth.
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In addition to permanently extending Bush's tax cuts, the major features of McCain's plan include slashing the corporate tax, reducing the estate tax, giving companies a deduction on new equipment and increasing the child tax credit. McCain also wants to extend relief from the gas tax this summer and the alternative minimum tax (AMT), which has been hitting upper-middle-class families with higher tax rates in recent years.
McCain's most sweeping proposal is allowing taxpayers to figure their taxes under an optional alternative system. McCain's campaign hasn't fleshed out the details, but said it will offer a large standard deduction and an increased personal exemption.
To get a sense of McCain's ambition, his tax cuts would cost the federal budget as much as $4 trillion from 2009 through the end of 2018, according to the nonpartisan Tax Policy Center. That's eight times the size of the Pentagon's base budget this year. Bush's cuts would cost only $1.6 trillion if extended to cover the same ten-year period.
Sen. Lindsey Graham, the national co-chair of McCain's campaign, summed up the candidate's current thinking succinctly during a June interview on ABC's "This Week." Host George Stephanopoulos asked Graham how McCain's tax and healthcare policy compared to Bush's.
Stephanopoulos: "John McCain is calling for an extension or maybe even an enhancement of the Bush policies?"
Graham: "Yeah, absolutely."
The most in-depth comparison to date of McCain and Barack Obama's tax plans was performed by the Tax Policy Center, a joint venture of the center-left Brookings Institution and Urban Institute that is nonetheless staffed by both Republicans and Democrats -- co-director Eugene Steuerle was a deputy assistant secretary under Ronald Reagan -- and is known for its methodological rigor. Its 38-page analysis found that McCain's proposals would make the tax system even "more regressive" than permanently extending the Bush tax cuts of 2001 to 2006. McCain would accomplish this by following Bush's blueprint and then supersizing it: providing "relatively little" tax relief to low- and middle-income earners, while giving "huge tax cuts" to the highest income brackets.
The Tax Policy Center's computations show stark differences between the Obama and McCain plans in their relative impact on middle-class and high-income taxpayers. A middle-class family making $66,000 a year would see their taxes drop by $319 a year under McCain's proposal, while a wealthy family making $604,000 a year would see a cut of $45,000. By contrast, Obama offers the biggest breaks for taxpayers at the bottom and in the middle of the income spectrum, while imposing sizeable tax increases on some of the highest earners -- those making more than $250,000 annually. Under Obama's plan, the middle-income family would receive a tax break that is three times larger than McCain's -- $1,042. The wealthy family would see a tax increase of $116,000 a year.
McCain’s campaign did not respond to Salon's requests for comment, but McCain’s economic advisor Douglas Holtz-Eakin called the analysis "misleading on the whole and wrong in some particulars" in a response on the Tax Policy Center’s blog. Holtz-Eakin’s main argument was the analysis did not give enough weight to the spending cuts that will offset McCain’s tax cuts.
McCain would likely be making any economic proposals to a hostile Democratic Congress, so his ability to implement new tax cuts is questionable. But observers on the right have offered praise for McCain's intentions anyway. Conservative anti-tax crusader Grover Norquist called McCain a "tax-increasing Bolshevik" in 2005, and slammed him early in this election cycle for balking at signing a no-tax-increase pledge. Now he lauds McCain. When asked by Salon if he preferred the McCain or Bush tax plan, Norquist answered quickly.
"The McCain tax policy is to continue the Bush tax cuts and add three more, so I prefer McCain," Norquist said. He paused for a moment and then added. "McCain's is bigger, better."
