Taxing Politics: Where the Candidates Stand

Tax policy changes with every new administration.  Do you know how you'll be affected this time?

"The wages of sin are death, but by the time taxes are taken out, it's just sort of a tired feeling." Paula Poundstone's one-liner expresses what most people feel about taxes-that paying them is a drag.  This year, as in every other election contest, the U.S. presidential candidates are trying to ride that tax hate right into the White House.

John McCain, Barack Obama, and Libertarian candidate Bob Barr are hoping to gain some traction with the American voter by proposing big changes to the tax code. Each candidate is motivated by deep, personal convictions about the role tax policy should play in the American lifestyle. The problem of managing the government's largest revenue source always comes down to the question of what's better for the economy: taxing and government spending, or cutting taxes so that consumers and employers can do the spending themselves.

Minimalist perspective

Barr's tax policy is the most radical of the three. He says, quite simply, "Americans pay far too much in taxes."  He would like to see taxes slashed to the bare minimum, and government reduced to a skeleton crew. This couldn't be achieved without a complete overhaul of the tax system, since there'd be no budget to oversee tax loopholes and politically motivated tax legislation. Barr suggests that either a flat income tax system, or a consumption tax system, could be appropriate. Other levies, such as the estate tax and capital gains tax, would be completely eliminated.

Supporting the middle class

The Democratic and Republican perspectives on taxes have historically been fundamentally different from one another. In the simplest sense, Democrats lean towards taxing more to fund government programs, while Republicans prefer taxing less to allow consumers and businesses to fund economic growth. Having said that, the tax policies of McCain and Obama do have some surprising similarities, particularly with respect to the middle class. Both men are supportive of a tax cut that would benefit middle-income households. For those who want that benefit quantified, a non-partisan group called the Tax Policy Center has made the following conclusions about the proposed changes:  

• Under McCain's direction, 65 percent of the middle class would realize a $300 tax cut.

• Obama's program would result in 90 percent of the middle class realizing a tax cut of about $1,000.

Divergent perspectives on upper class

McCain and Obama don't agree, however, on how much of the tax burden should be borne by the wealthy. McCain would decrease the tax bill for America's wealthiest wage earners by 9.5 percent, while Obama would increase it by 1.5 percent.

Interestingly, the Tax Policy Center's analysis also indicates that both the McCain and Obama tax policy plans would create revenue shortfalls, thus increasing the federal deficit.  All that talk about moving money around may get someone into the White House-but if the plan isn't workable, it isn't likely to be implemented.