Obama And McCain Plans For Income Taxes

CBS Evening News: How The Candidates' Proposals Would Affect Your Wallet

(CBS)  To help you make an informed decision in the presidential election, CBS News will be devoting a large part of our broadcasts between now and Nov. 4 to telling you where the candidates stand on major issues - from the war in Iraq to health insurance to education … and a lot more. Each piece will be an in-depth look at the issues facing the 44th president. First up: personal income taxes. CBS News correspondent Anthony Mason reports on how the proposed policies of Barack Obama and John McCain would affect you.

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The Issue

Of three Ohio families Mason met, there were three income levels and three tax bills.

Charles and Joi Beacham are from Pataskala, Ohio.

The Beachams have three kids, two of whom live with Charles' ex-wife. They just bought a foreclosed home. Charles runs his own office-supply delivery business. Joi has a new job as a teacher. They earned nearly $32,000 last year.

Kendra and Andy Foos live in Miamisburg, Ohio.

The Foos have three children, too. Andy is a construction manager. Kendra runs her own custom candy-wrapper business from home. They made nearly $64,000 last year.

Gilbert and Lisa Wilson live in Plain City, Ohio.

The Wilsons also have three kids. Lisa is a stay-at-home mom. Gilbert owns a computer network company. Their income: $213,000 on their last 1040.

CBS News went to Ohio to talk taxes because it is a critical swing state in this election. The economy is the No. 1 issue there and the race is at a virtual dead heat.

"What's your sense of the state of the economy right now?" Mason asked the Fooses.

"Ohhh," Kendra said.

"It's rough," Andy said.

At every income level, these families are feeling the pinch.

"I'm nervous. I'm seeing things change that I thought wouldn't," Charles Beacham said.

Lisa Wilson said: "Everything has gone up this year."

To the Foos family, being middle-class means being caught in the middle.

"There seems to be breaks for those with very low income, and lots of breaks for those who are very high income. And we are the ones that are constantly struggling," Kendra Foos said.

"We don't fit into any loophole," Andy said.

"In terms of taxes, what do you want from the next president?" Mason asked the Beachams.

"Relief," Joi said.

So, where do the candidates stand?

The Candidates

In June, Republican nominee John McCain said: "I don't want to send any more of your earning to the government, my friends."

And Democratic nominee Barack Obama said: "We will provide real tax relief for the middle class by cutting taxes for 150 million Americans."

Sens. McCain and Obama differ sharply, starting with the bush tax cuts due to expire in 2010. McCain would make them permanent, while Obama would eliminate them for families making more than $250,000.

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Read more about this series on Couric & Co. blog.

Katie Couric's Notebook: Where They Stand

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The cornerstone of Obama's tax plan is what he calle the "making work pay credit." It would give any worker making less than $150,000 a credit of $500 - up to $1,000 per family.

That tax credit would be refundable, which means even if you owe no taxes, you could still get a check from the government.

Obama would also create a similar college tax-credit for the first $4,000 of tuition. In return, a student would have to perform 100 hours of public service.

"We'll invest in you, you invest in America, and together we'll march the country forward," Obama said in July.

He'd also give low-income families a 50 percent credit on up to $6,000 in child-care expenses. He'd eliminate income tax for seniors making less than $50,000 and impose a 2 percent Social Security tax on those making more than $250,000.

"That way we can extend the promise of Social Security without shifting the burden on seniors," he said.

The centerpiece of the McCain plan is a tax break for families.

"I'll double the personal exemption from $3,500 to $7,000 for every dependent for every family in America," McCain said in July.

On investments income, McCain would keep the tax rate at 15 percent. Obama would raise it to 20 percent for those earning more than $200,000.

Obama would also raise the top tax rate from 35 percent to almost 40 percent. The second-highest bracket would jump from 33 percent to 36 percent. McCain would leave these rates unchanged.

Finally, both candidates would raise the income trigger for the alternative minimum tax, which was targeted at the right, but is now trapping more and more middle-class families.

So what could these plans mean for the three families in Ohio?

The Impact

Columbus accountant Matt Yuskewich ran the numbers for CBS News.

"They are all touched by the plans in some respect," Yuskewich said.

The Beachams, who made $32,000 last year, would see no change in their taxes under McCain - but the Obama plan would help them.

"The Beachams will be the beneficiary of a number of these refundable credits," Yuskewich said.

The family, which paid no taxes last year, would receive a check from the government for more than $2,200.

"What do you think of that number?" Mason asked them.

"That would work," Charles said.

Joi added: "That would be really nice."

The Wilsons are at the other end of the spectrum, earning $213,000. That puts them in the 28 percent bracket. If Gilbert's business improves, his income could push him into the 33 percent bracket, which under Obama's plan would jump to 36 percent of income.

"That would be painful. Another 8 percent of the income," Gilbert said.

That could be at least $5,000 more in taxes.

Finally, there's the Fooses.

According to Yuskewich's calculations, McCain's dependent exemptions would cut the Foos' taxes by $225. Obama's "making work pay" credit would cut their tax bill by $500.

"Does that feel like enough to you?" Mason said.

"Doesn't seem like much," Kendra Foos said.

"It's not enough to make a real big difference. No.," Andy Foos said.

The Foos, who are both undecided, feel forgotten again.

"We're on our own. That's how I feel. There isn't anybody there that's rooting for us," Kendra Foos said. "They're the ones in the middle that can take care of themselves."

And it's middle-class taxpayers like Andy and Kendra Foos who are expected to decide this election.

Yes, Read my lip; "NO MORE INCOME TAXES" it''s illegal for anyone include the president to finance unnecessary, undeclared wars with American''s incomes!

That''s not what "We the People" have in mind.
Stop the insanity, please... and let''s worry about our house...

[paulwp2]

Let me see if I have this right, under Obama''s tax plan the couple that pays ZERO, ZIP, NADA in taxes will have a tax refund of $2,200. (How do you get a refund when you have paid nothing?)The couple that pays the most in taxes will have in increase in taxes of $5,000. Talk about tax relief! Why not just eliminate the IRS and have the most taxed couple send a check directly to the couple that pays no taxes. Makes perfect sense. Is this a great country or what!

[incpa1]

Sorry, I got the summary line incorrect on previous:
Taxes are 1,575 less under McCain than current.
Taxes are 1,000 less under Obamba than current.

[incpa1]

As a CPA I feel I need to add some clarification here. There is missing data, most notably the ages of children.
I disagree with the calculation for all examples, but most notably for the Foos.
Under current law they would have taxable income of 35,600 (64,000 less 10,900 standard deduction less 3500 x 5 personal exemptions). Tax on this would be 4,528 offset by 1000 x 3 child tax credit (assuming all children are under age 17), for a net tax of 1,538.
McCain plan: Taxable income of 25,100 (64,000 less 10,900 less 3500 x 2 (personal exemptions for parents) less 7000 x 3 (personal exemptions for children)- net tax being 2,963 offset by 3,000 child tax credit for a negative tax of 37.
Obama: Taxable income of 35,600 (same as current)- tax on this 4,538 (same as current) offset by 3,000 child tax credit and offset by 1000 making work pay credit.
Summary: taxes are less by 1,538 from current under McCain and less 538 than current under Obama.

[craigri]

The story on the tax plans was a disgrace. First, in order to illustrate your misleading pint, you upped the income of the wealthiest family, instead of sticking with their actual income. Second, you misrepresented their actual taxable income (see above post by Franz). This has the effect of distroting who the Obama tax increase would actually effect. Third, you do not mention once what the increased tax revenue would go for - improved schools, more affordable healthcare, better roads and stronger national securtiy. This is the worst part of your reporting - divorcing one segment of an issue from the other parts, in this case only saying what people would pay in taxes, not saying what they get for those taxes. Horrible journailsm and a disservice to American voters!

[craigri]

The story on the tax plans was a disgrace. First, in order to illustrate your misleading pint, you upped the income of the wealthiest family, instead of sticking with their actual income. Second, you misrepresented their actual taxable income (see above post by Franz). This has the effect of distroting who the Obama tax increase would actually effect. Third, you do not mention once what the increased tax revenue would go for - improved schools, more affordable healthcare, better roads and stronger national securtiy. This is the worst part of your reporting - divorcing one segment of an issue from the other parts, in this case only saying what people would pay in taxes, not saying what they get for those taxes. Horrible journailsm and a disservice to American voters!

[craigri]

The story on the tax plans was a disgrace. First, in order to illustrate your misleading pint, you upped the income of the wealthiest family, instead of sticking with their actual income. Second, you misrepresented their actual taxable income (see above post by Franz). This has the effect of distroting who the Obama tax increase would actually effect. Third, you do not mention once what the increased tax revenue would go for - improved schools, more affordable healthcare, better roads and stronger national security. This is the worst part of your reporting - divorcing one segment of an issue from the other parts, in this case only saying what people would pay in taxes, not saying what they get for those taxes. Horrible journailsm and a disservice to American voters!

[grannieof2]

Under Obama%u2019s plan family three, the wealthiest of the three, would have a tax bill that would increase by $5,000 a year. Family one, with the lowest income of the three, while already paying no taxes, would get a check for $2,200. In essence, this means that family three would be giving $2,200 of their money directly to family one. This is blatant wealth distribution. This isn%u2019t a Robin Hood attempt to take from the corrupt rich government and give to the poor; it is stealing from people that have worked hard to become successful. It is socialistic in nature, creates dependency on the government, provides a disincentive to succeed, and is just plain wrong.

[wasademnotno]

My complaint is that the effects of the other amorphous tax proposals of Obama campaign are mentioned in this story -- ALL of which will have a significant impact on us all: annual taxes on houses larger than 2,100 sq. ft.; 28% (or some larger amount) on ALL home sale profits; the increase in the income threshold for social security taxes (only income up to $102,000 is taxed 17%) PLUS the extra 2% on income over $250,000; increases in the medicare tax rates (no matter what your income); increases in gasoline, heating oil, natural gas & diesel taxes; re-institution of estate/inheritance taxes. And Obama hasn''t even said how he''ll pay for universal health insurance (everyone can get health CARE... not all can get INSURANCE). McCain''s proposals seem far fairer than Obama''s. And remember that every proposal by any candidate for a new "benefit" or "service" to the American citizen WILL COST YOU MONEY... and the only way to get the money is to TAX us. I am tired of people punishing me and my family for working hard, saving, putting ourselves and our children through school, living within our means and achieving the American dream... and tired of people who take my money and give it to others.

[grannieof2]

Why can''t any politician use their head and come up with a very fair tax. A flat rate, say just a measly 10%. Then everyone pays their fair share, and it should include those who get government handouts. I don''t have a problem with helping those in need get back on their 2 feet but not for the rest of their lives.

Why is it that Republicans always want to cut taxes for the rich? That makes no sense at all. I mean think about it. The rich pretty much dictate what people are going to make anyway right? They get to set the wages. So let''s say someone make $30,000 a year and they pay $10,000 in income tax. That person actually only made $20,000 right? So let''s say the govt gets rid of income tax for someone making $30,0000 or less. That person just got a raise yes, but that company wouldn''t have to give that person a raise for the next year, or the year after that. And that could be very beneficial to the company right. And think about this, wouldn''t that make it easier for us to compete for jobs with the rest of the world? If companies didn''t have to pay someone $30,0000 a year, but instead only $20,000 a year then they would be more inclined to keep maunfacturing jobs here than ship them overseas, right. It makes no sense at all to give tax breaks to those that dictate our wages anyway. They just get to make more money, and the workers get whatever they want to pay us. I think Ron Paul is right on this issue. Getting rid of income tax, at least for low income workers might be the best move this country could make right now. You might want to think that over. You are giving a big tax cut now, but jobs are important too. To bring back jobs we need to lower the pay rate the companies are willing to pay here, and cutting the income tax would make alot of sense I think.

[pfrantz42]

In 2007, the IRS tax brackets for Married Filing Jointly (the lowest tax rates) show the 28% bracket from $128,500 to $195,850. If the Wilsons are in the 28% bracket, the $213,000 must be gross income, not taxable income. If the Wilsons are fortunate enough to increase their income in 2008, their tax rate will remain the same until they exceed the $195,850 top of the 28% bracket. Only the taxable income exceeding the $195,850 will be subject to the change from 33% to 36%. If they exceed the 28% bracket by $2,000, it will increase their tax rate by 3% times $2,000 or $60 dollars over the tax rates currently in effect.

Based on 2007 tax brackets, the change from 33% to 36%will affect only that income over $195,850 for Married filing jointly. Persons with a filing status other than Married filing jointly, may be affected at a lower amount. The tax brackets are available from the IRS website.

Please check your facts and correct your story. This portrayal of the tax plans is important and must be correct.

Thank you for your consideration.

[iibhawaii]

Now tell me, what if Mrs. Foo or one of the Foo children had an unexpected pregnancy. They would have no option/choice but to keep the child because Roe v. Wade would have been turned over. They would not have a health care program to help with prenatal/labor/delivery costs. And of course the cost of raising an unexpected little one would be difficult. This would make a huge impact on their finances.

[dan1967win]

SARAH PALIN WAS DIRECTOR OF 527 POLITICAL GROUP ORGANIZED BY INDICTED U.S. SENATOR TED STEVENS FROM ALASKA:

Here is an excerpt from the Washington Post article:

"Alaska Gov. Sarah Palin began building clout in her states political circles in part by serving as a director of an independent political group organized by the now embattled Alaska Sen. Ted Stevens."

Link to the full article:

http://voices.washingtonpost.com/the-trail/2008/09/01/palin_was_a_director_of_embatt.html

I dont want 4 more years of Bush and Cheney.

VOTE FOR BARACK OBAMA AND LETS GET A DEMOCRAT WIN IN NOVEMBER!

[jc71165]

I was sorry to hear this part of the story. The election is so much more than tax breaks. We need to focus on more important topics like health care, education, and global warming!

[rmonroe401]

SammieJaye,

Exactly, if they wanted to show that people making over 250,000 a year would pay more taxes, they should have found a family making that. But maybe they were having difficulty finding someone in this post Bush era where the middle and upper middle class are making less money. But I agree that putting what ifs in the story is ridiculous. What if the sky fell tomorrow, what if pigs with lipstick could fly, what if the 32,000 a year couple had a divorce, who cares about what if''s, lets stick with the facts!

[elz523]

The Wilsons are at the other end of the spectrum, earning $213,000. That puts them in the 28 percent bracket. If Gilbert''s business improves, his income could push him into the 33 percent bracket, which under Obama''s plan would jump to 36 percent of income.

"That would be painful. Another 8 percent of the income," Gilbert said.

That could be at least $5,000 more in taxes.



Wow, this looks like McCains people wrote it. It appears as if Obama''s tax rate would be responsible for an 8% incrase in taxes. In reality there is a 5% increase that they would realize that is in the current code. Of course that is only IF they were to get an increased of $37,000.

Here''s the other thing: let''s assume that this family gets to $250,000, they would pay an additional 8% on that $37,000 in taxes, leaving them with a gain of about $34,000 (roughly and this only applies to the 8% marginal difference over what they are paying currently). I think they would take it!

[flpsl]

I am so sick of the liberal slant in the media!! Again last night during this report, the liberal slant was overwhelming!!!! What happened to unbiased reporting unless the report was clearly an editorial? The impact from Obama''s proposed tax plan was never clearly identified for the Wilsons. I''m presuming that the shot of the calculator showing somehting like $11,000 was the additional the Wilson''s will be spending in taxes if Obama is elected. Has anyone given consideration to what that expense will do to them? Yes, they may have a more lavish lifestyle than the first two families represented, but no one considers the risk they took in order to position themselves there. No one looks at the implications that added expense could have on them. To quote another commentor, "Robin Hood" is alive and ready to destroy our country! And the media is lending a willing hand!!! Reports like this are supposed to be helpful to the voters; not favor a specific candidate!

[iibhawaii]

What if one of the Foos'' children or even Mrs. Foo had an unexpected pregnancy because they tried abstinence and were unable to get an abortion because Roe v. Wade was overturned. That would change their economic situation dramatically.

[iibhawaii]

What if one of the Foos'' children or even Mrs. Foo had an unexpected pregnancy because they tried abstinence and were unable to get an abortion because Roe v. Wade was overturned. That would change their economic situation dramatically.