If there’s one thing I’ve learned from blogging and receiving tons of email, we all have our “pet” electoral issues and hot buttons – and they vary widely from person to person. For me, it’s national security first; the economy (and tax policy) second; and energy policy (a closely related) third.
On the subject of the economy, Jack Kemp has a good op-ed on the presidential candidates and their proposed tax plans (thanks to Mike Davis at the NV RLC for bringing it to my attention). I strongly encourage voters to read the whole thing, but here are some key points (summarized in my own words):
Barack Obama says he supports a tax cut in the form of a $500 refundable income tax credit for all workers (except those in the top 5 percent of income earners, who will pay more taxes) “unless the economy remains weak.” So…Obama does recognize that tax increases on the rich have a negative effect on the overall economy. (But why does he think that matters only in “weak” economic times?)
Obama’s tax credit does not reduce marginal tax rates, so it won’t benefit the general economy because it provides no long term (additional) incentives for work, savings, investment or business expansion. (People will get their $500 refund check, spend it, and that will be That.)
On the other hand, McCain wants to double the personal exemption for dependents from $3,500 to $7,000 for families regardless of income. (For middle-class workers in the 25% tax bracket, the $3,500 exemption increase would reduce their tax liability by $875 for each child. Families with three children are thus looking at $2,600+ in tax savings.)
And McCain proposes marginal tax rate reductions – which is great news in country that pays the second highest corporate tax rates in the entire industrialized world. McCain wants to reduce the federal corporate tax rate from 35 percent to 25 percent – a boon for middle class workers in the form of new jobs, better pay, and a stronger dollar.
And all this will most likely raise rather than reduce tax revenues. (Why? Kemp cites a 2007 study by the Treasury Department which showed that Ireland — with a 12.5% corporate tax rate — raises just shy of 50 percent more revenue on a comparative basis than the U.S. does with a 35 percent rate!)
McCain would also keep the top capital gains tax rate and dividend tax at 15% which is needed in the stock world (stocks are now held by more than 2/3rds of all Americans). McCain further wants to phase out the Alternative Minimum Tax (AMT) which burdens 25 million middle-class families with another $2,700 in taxes each year (on average).
Obama, by contrast, has proposed to raise marginal tax rates for almost every federal tax — the individual income tax, the capital gains tax, the dividends tax, the payroll tax, the death tax, etc. and he would increase corporate taxes where and when he could.
McCain’s plan is a good start, but I agree with Kemp: we need to promote additional middle-class tax cuts through fundamental reform of our “confusing, contradictory and confiscatory tax code.”
Kemp outlines a proposal by Rep. Paul Ryan, R-Wis. to allow workers to choose a flatter tax system (which is also worth reading about, at the end of his op-ed).