spokesNspin

A few weeks ago we had a discussion on this blog about voters and how they determine who they will vote for.  I mentioned that voting based on specifics regarding a candidate’s proposed policies is difficult and probably not necessary.  Case in point are proposals for income taxes by McCain and Obama.

You can get a 59 page summary of the tax proposals from the Tax Policy Center.  That’s right folks.  If you want to go to the source and read up on it you will find 59 pages.   When you read the document you soon realize that it isn’t easy even for professionals to figure out the tax proposals.  They have to determine what the proposal is.  There are differences between what candidates say and what is in their official positions.

The candidates also tweak the proposals over the course of the campaign.   I will give you the gist of what I see in the document.  

The National Debt

At the end of 10 years Obama’s plan increases the National Debt by $3-$3.5 trillion.  McCain’s increases it by $6-$8.5 trillion.  Both candidates complain that the analysis doesn’t take into account proposed cuts in spending.  The Tax Policy Center assumes(rightly so in my opinion) that cuts are easier proposed than done.

Income Distributional Effects

Here is a table of the changes in taxes for different income groups for 2009 based on the proposals.

Quintile	Limit	Obama	McCain
I	$18,981	-$567	-$21
II	$37,595	-$892	-$118
III	$66,354	-$1,118	-$325
IV	$111,645	-$1,264	-$994
V	$160,972	$3,017	-$6,498
Top 1%	$603,402	$93,709	-$48,862
Top .1%	$2,871,682	$542,882	-$290,708

You will notice that the quintile limits are different than in my previous post.   That is due to differences in the calculation of income and the units. 

If you are at the bottom rung you will see your taxes go down by a whopping $21 under McCain’s tax proposal.  If you are in the top .1 percent you see your taxes go down by $290,708 under McCain but they go up by $542,882 under Obama. 

How can the Investment banker who will go out with a $200 million golden parachute when the government takes over his business survive if Obama makes him pay another $500,000 plus in taxes?  It’s outrageous.  Poor little rich guy!

One interesting thing to note about the distribution is that under Obama more people in the bottom 60 percent get tax cuts but there are also more people who have tax increases in this group relative to McCain’s proposal.  Does that make sense?  Remember there are winners and losers in any proposal.  Being on the losing or winning side will depend on your personal circumstances.  

The big winners under McCain are those in the top 1 percent.  If you are in that group 7 percent of you will get at tax cut under Obama.  Under McCain, 98 percent of that group gets a cut.

So much for proposals from “say anything to get elected” candidates.

Individual Income Tax Collection 2006

If you would like information on the reality of taxes you can go to the IRS web site. 

Just a couple of notes about taxes from that site.  More than 1/4 of the taxes are paid by about .3 percent of the taxpayers making about 15 percent of the total Adjusted Gross Income.  Even though the system is theoretically progressive, those making over $5 million pay a smaller percentage of their income in taxes than those in the  $1-$5 million category. 

Requiring those individuals to pay the same percentage as those in the bracket below them would increase revenue by over $20 billion trillion .

For those of you who get all excited about a flat tax system take a look at these statistics.  Under a flat tax system, approximately 86 percent of the taxpayers would see their taxes go up significantly.   

For those of you who would like to read my personal tax proposal you can go here.

This entry was posted on Tuesday, September 23rd, 2008 at 11:43 am and is filed under Politics, News & Social Commentary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.