McCain Vs. Obama #1: Taxes

This is the first in a series of semi-serious comparisons of the candidates on the issues. You remember the issues. That's what people would be talking about if they weren't so wrapped up on the media-generated drama about old pastors, number of houses, and stuffed moose-heads. I made that last one up. 

TAXES:

Prologue: The short answer is that no matter who wins, your taxes are likely going down. Mainly because the economy is choking on a pretzel and it's a very delicate time. But here are the details.

McCain Plan: The rich would pay much less, the poor and middle-class would pay a bit less, and the federal deficit would grow, according to a study by an indpendent, non-partisan group Urban-Brookings Tax Policy Center. McCain would raise the dependent exemption from $3,500 to $7,000, set the death tax at 15% for estates above $5 million, keep the capital gains tax where it is, and cut the corporate tax rate from 35% to 25%. McCain's tax plan would cost the US treasury $3.7 trillion and increase the deficit by $600 billion.

Obama Plan: Everyone pays less except the rich and anyone else making over $250,000/yr, with the bulk of the savings handed to the lower class. His plan features a $4,000 credit per child in college. Seniors who earn less than $50,000 would pay no income tax. Obama would leave the corporate tax rate at 35% but raise the captial gains tax to 20%. Obama's plan would cost the U.S. Treasury $2.7 trillion (one trillion less than McCain's) and return $700 billion to America's bottom line. 

WINNER: Tie (but vote McCain if you're very rich). As I mentioned, chances are that your taxes are going down regardless of who wins. McCain's plan, as all Republican plans puts more pressure on the deficit and less pressure on the rich and corporations.The problem with that is that it's not sustainable. You simply can't consume 6% more than you produce forever. As Paul Volker expalins, "The United States is absorbing about 80 percent of the net flow of international capital. And at some point, both central banks and private institutions will have their fill of dollars."

I am also skeptical of McCain's trickle-down approach: letting the uber rich keep more of their money in hopes that it will eventually filter down through personal spending doesn't really work. They just get richer. Greenspan doesn't like McCain's plan for this reason and Paul Volker (the 12th Fed Chairman) has outright endorsed Obama's plan for the country.

Greenspan (a Republican and lifelong friend of McCain's) said the widening income disparity among Americans is a "very serious'' issue, and requires both raising the pay of lower-income workers and reducing higher incomes.

That said, I like McCain's child-tax credit because it puts money back in mom and dad's pocket and I do believe that he's a fiscal conservative at heart. Plus, there is something to be said for being gentle on corporate taxes at a time when team USA's competitiveness is, er, shaky.

I like Obama's attempt at shoring up the gap between rich and poor as long as it doesn't extend into spending sprees at the governement's social program mega-store. Capitialism must be mindful that it needs to keep most everyone IN the game in order to survive. As for capital gains, the 5 percentage points that Obama wants to add isn't terribly significant if you look at it from a historical perspective. Heck, Regan charged more.