It wouldn't be an election year without candidates promising tax cuts, right? But who gets them, how much they are, what's the likelihood they can ever be made and what they say about each candidate's priorities are the bigger questions.
"Tax and fiscal policy will loom large in the next president's domestic policy agenda," says a recent report from the nonpartisan Tax Policy Center. "The leading presidential candidates have not addressed it seriously."
The center, a joint venture of the Urban Institute and Brookings Institution located in Washington, D.C., analyzed the plans, calling them "major changes" to current tax laws. In the report, the authors examined not only campaign white papers, but details advisers provided as well as what the candidates have said on the stump.
"Clearly, taxes are always an important issue. They get a lot of attention during the campaign," says Len Burman, the center's director. "But there's a lot of misinformation."
In particular, the group FactCheck.org has accused the McCain campaign of running a series of commercials that falsely accuse Obama of wanting to inflict painful tax increases on working families.
But, in the big picture, the consensus among experts is that neither candidate could do what he proposes without "unprecedented" cuts in federal spending, and neither has detailed such a plan.
In general, Arizona Sen. John McCain, the Republican nominee, wants to make permanent the Bush tax cuts enacted since 2001 and set to expire in 2010. His plan would "primarily benefit those with very high incomes," according to the report.
The Democratic nominee, Sen. Barack Obama of Illinois, would like to make relatively bigger tax cuts among lower- and middle-income groups and increase taxes in the highest income brackets.
The center's analysis also shows:
• Obama's cuts for people earning up to $112,000 would be bigger than McCain's.
• McCain would cut taxes for all taxpayers, no matter their incomes, including a $45,000 reduction for people who make over $603,000 annually and a $269,000 cut for people making more than $2.9 million.
• Obama's tax reductions would end with people earning $227,000 annually, and the next income bracket is where tax increases would begin.
• Both plans would significantly increase the federal deficit.
• On the campaign trail, McCain greatly exaggerates the extent of his cuts compared to what his advisers say or his official proposal includes.
"We had criticisms from both sides," Burman says. "In some ways, what we're doing is really unfair. Campaigns aren't really a time when you expect people to make policy."
The center's analysis, Burman admits, is a rough estimate for any voter-taxpayer because of a lack of exact calculations of deductions, investment income and other variables. And either candidate's plan would need congressional approval — and would likely be revised in the legislative process.
Furthermore, because the country is facing a drastically different fiscal situation than just two weeks ago, either candidate could have to re-evaluate their overall "fiscal stance" upon taking office, says Joel B. Slemrod, professor of business economics and public policy at the University of Michigan.
"At this point," says Slemrod, also director of the university's Office of Tax Policy Research, "it is real hard to tell where we might be in January or February. It could be that Obama or McCain will have to see where we are at once all this dust settles."
By the brackets
Still, Mary Herring, associate professor of political science at Wayne State University in Michigan, says candidates' tax plans or reflected priorities could be a deciding factor for some voters.
"It's pretty clear that voters take their own personal financial situations into consideration when they vote. That's especially true for swing voters. If you don't have a strong party loyalty to begin with, these other kinds of issue decisions would be more influential," she says.
The respective tax plans might most strongly affect voting decisions for people who make less than $66,000 per year (that's more than 60 percent of American taxpayers) or those who make more than $161,000, says Jason Booza, demographer at Wayne State University's School of Medicine, if they are guided by the plans as described in the campaigns.
For people in the less than $19,000 or between $19,000 and $38,000 income groups, McCain would offer $19 or $113 respectively in tax reductions while Obama's plan would reduce taxes by $567 and $892 respectively. Obama would cut taxes for people earning between $38,000 and $66,000 by $1,042; McCain's plan would offer just $319 in tax reduction to that group.
For people earning between $112,000 and $161,000, McCain would cut taxes by about $400 more than Obama — $2,614 to Obama's $2,204 — and for people making between $227,000 and $603,000, Obama would lower the average tax bill by $12 while McCain would reduce it by $7,871.
Above $603,000 but below $2.9 million, Obama would add about $116,000 and McCain would reduce the average tax bill by about $45,000. For those few who earn more than $2.9 million, Obama would collect an additional roughly $702,000 while McCain would provide $270,000 in tax savings, according to the center's analysis.
Under either candidate's plan, the national debt would increase by trillions, continuing the trend of deficit budgets. The Congressional Budget Office predicts under current law the cumulative deficit of the federal budget would be about $2.3 trillion from 2009-2018. According to the Tax Policy Center's analysis, both candidates' plans would increase that debt. McCain's plan would increase it by $5.1 trillion, Obama's by $3.6 trillion.
John Jackson, a University of Michigan political science professor, says both are too high and faults both candidates for not better addressing long-term economic issues in their campaigns and tax policies.
"It's a problem. One is the intergenerational problem: What are the consequences of leaving it to our kids? At some point this money has to get paid off, and `the deficit` really restricts the ability of the government to engage in responsible fiscal policies," Jackson says. "Second, and very scary, the debt is being held by foreign countries. … They might decide it's in their national interest to destabilize the dollar."
But now, says one Obama adviser, isn't the time to focus on the deficit as financial markets collapse, foreclosures rise, the Iraq war continues and the middle class suffers.
"The bigger worry is, are you going to increase the deficit in a way that's not responsible?" says William Spriggs, chairman of the economics department at Howard University in Washington, D.C. "This is an unprecedented time."
The strength of Obama's plan, according to Spriggs, is that it starts to rebuild the economy from the bottom, a strategy that he calls effective. "It's clear that if there's going to be growth it will result from having a healthier balance sheet of the American household. That's what this policy is about. The McCain tax cut clearly says you have to believe in trickle-down," he says.
But McCain doesn't want to give a new tax break to the super-rich, he just wants them to keep getting all the money they've received under the tax program adopted in 2001. "It's not a tax cut for the wealthy," says Douglas Holtz-Eakin, senior policy adviser to the McCain campaign. "We want to keep taxes right where they are."
McCain, who touts himself as a "fiscal conservative," insists that his administration can maintain the tax status quo and still reduce the massive budget deficit and slow the pace of the spiraling national debt by making extensive spending cuts, Holtz-Eakin says. "We're committed to a comprehensive effort to slow the growth of spending," he says.
But specifics are in short supply. "It would be ahead of schedule to provide that sort of detail now," says Holtz-Eakin, a former director of the Congressional Budget Office.
For McCain to enact the tax cuts he's described in his speeches, according to the Center for Tax Policy report, he'd have to cut federal spending in 2013 by more than 25 percent to balance the budget. His advisers say the lower tax rates on the higher income groups and corporations would help the economy grow, which could reduce the need for cuts.
Eric Toder of the Tax Policy Center isn't convinced the McCain "trickle-down" philosophy would work. "That's very debatable, especially when you're increasing the deficit at the same time and causing the government to borrow more," he says. "If people buy that argument, then that's probably who they should vote for. If they don't buy that argument, it would go the other way."
The entire report as well as tables of predicted effects on individual taxpayers can be found at the Center for Tax Policy website at www.taxpolicycenter.org.
A version of this story appeared originally in Detroit's Metro Times.[email protected]