The Consequences of The Candidates’ Tax Plans

[Dr Ron]

http://liberalvaluesblog.com/?p=3408



The Consequences of The Candidates’ Tax Plans

June 13th, 2008 by Ron Chusid

Earlier I noted how Republican claims of higher social security taxes under Obama are greatly exaggerated. Later in the day a study came out from the Tax Policy Center comparing the effects of the tax policies of both candidates. (Full report here in pdf format.)

The graph above gives a quick look at who benefits the most from the policies of each candidate. Not surprisingly, those in the lowest quintile get the biggest breaks under Obama’s plan while those in the top one percent get the biggest tax breaks from McCain.

Those results could have been predicted easily. The more interesting question for myself was how the tax plans would affect all us more affluent “elitists” who back Obama. The Republicans will try all sorts of scare tactics to convince the upper middle class to return to voting for them even though in recent years their economic policies have not been of benefit to the upper middle class.

Hilzoy’s analysis helps answer this question, along with a review of the data on pages 22-24:

The cutoffs for these quintiles (in 2008 dollars) are as follows: “20% $19,740, 40% $38,980, 60% $69,490, 80% $117,535, 90% $169,480, 95% $237,040, 99% $619,561, 99.9% $2,832,449.” (p. 24.) It’s worth noting that if you check the table on p. 24, which has more detail than this graph, you can see that people below the top five percent (which starts at $237,040) do not lose after-tax income under Obama’s plan, and people making $237,040-$619,561 lose all of $12 a year, on average. It’s only in the top one percent that people take a sizable hit. But since so much of the Bush tax cuts went to them, that seems fair to me.

Based upon these numbers, it doesn’t look like the bulk of the affluent voters who are supporting Obama are going to pay more in taxes. We might receive a bit more of a tax break from McCain, but the bulk of his tax breaks go to those in the top 0.1%. For example, looking at the 90-95th percentile, Obama’s plan provides an average tax cut of $2789. McCain’s plan gives an average tax cut of $4380.

It is doubtful things would ever turn out exactly as these predictions state, but if we go by these numbers the upper middle class does do slightly better under McCain than Obama. Personally I’m willing to go with the slightly lower tax cut if it means a better chance of ending the war and undoing the other harm committed under George Bush. Despite all the scare tactics used by Republicans, we are not really talking about that much money considering the income of this group.

Of course we can expect the ultra-wealthy to go for McCain, provided they vote purely based upon taxes and not on what is best for the country. The top 0.1% receives an average tax cut of $269,364 from McCain while they would see an average tax increase of $701,885 under Obama. (Again, this is largely a consequence of them receiving the largest benefits under Bush’s plan). On the other end of the spectrum, McCain would give the lowest quintile an average tax cut of $19 while Obama would give them an average tax cut of $567.

[Dr Ron]

1. More on Taxes

http://liberalvaluesblog.com/?p=3412

Friday I had a follow up post which primarily contains a video of Obama discussing his tax plans, plus the following:

Republicans have been making a number of false claims about Obama’s tax plans. The video above shows Obama describing his actual proposals. As noted yesterday, the vast majority of Americans will receive a tax cut under Obama, not a tax increase as the Republicans are often claiming. In the video Obama makes it clear that those earning under $250,000 will not receive an increase in taxes–not in their income tax, not in Social Security payroll taxes, and not in capital gains taxes. The vast majority will receive a tax cut.

I’m not saying things will definitely turn out this way as we cannot predict the future, and the president does not have complete control over tax policy. However this does contradict a number of claims being thrown around by Republicans who are misquoting Obama’s tax proposals to scare people into voting Republican.