The issues at the center of the debate can be a bit complicated – alternative minimum tax, anyone? – but there are ways to cut through the candidates' rhetoric and get a better sense of what their policies might mean for each of us.
Let's start with this: Barack Obama has said he will effectively raise taxes on those making more than $250,000 by allowing the Bush tax cuts to expire. (McCain initially opposed the cuts, but now supports them.) But McCain says that Obama's economic policy will result in a tax increase for all Americans, while Obama says he will institute "a middle-class tax cut that will provide $1,000 of relief to 95% of workers and their families." He also wants to eliminate income taxes for retirees making less than $50,000 per year.
One piece of evidence that Republicans point to is a suggestion by the Obama campaign that the cap on the Social Security payroll tax should (possibly) be increased. (Right now, you pay Social Security taxes up to a certain income level – the cap – above which that the tax is no longer applied.)
According to Ben Harris, a Senior Research Associate at the Brookings Institution whom we spoke to yesterday, the takeaway, once the dust settles, is this: If you make less than $250,000, there won't be a significant difference in your tax burden no matter which of the two candidates gets elected.
"Obama's plan for most people making under $250,000 would be different than McCain's, but it wouldn't be radically different," said Harris. "For most people who make under $250,000 a year, the difference is not going to be drastic at all."
"If you make more than $250,000 and you're voting with your pocketbook, it makes sense to go with McCain," he added.
Like the New York Times today, Harris characterized both plans as squarely in line with party orthodoxy.
"McCain's plan to a large extent – though not entirely – is an extension of what's been done for the past 8 years," he said.
McCain, for example, wants to eliminate the aforementioned alternative minimum tax – a minimum tax level that those who make a certain income are required to pay, regardless of their own calculations. (The initial idea behind the AMT was to keep the rich from paying less than their fair share of tax thanks to loopholes or deductions; now, however, people with relatively low incomes can be subject to it as well. More here.)
McCain also wants lower the rate of the estate tax (or "death tax," if you prefer), and raise the exemption level on the tax. He also proposes lowering the corporate tax rate from 35 percent to 25 percent.
Obama, meanwhile, is proposing an estate tax exemption of $3.5 million – which means that if your estate is worth less than $3.5 million, you won't pay the estate tax. He wants to increase the rate, however, for those who do have estates above that threshold. (Obama's Director of Economic Policy Jason Furman argued on a Tuesday conference call that "99.7 percent of estates would not face the estate tax.")
Obama has also proposed raising taxes on capital gains and dividends from 15 percent to 25 percent – so that if you make money from selling a stock, for example, you will pay a higher tax rate on your profits. (As it now stands, the rate is set to revert to 20 percent after 2010. It's also worth noting that 401(k) plans are exempted from capital gains taxes.) The McCain campaign says the proposal amounts to a new tax on the middle class; as the Washington Post noted, Obama's advisors say any increases would effectively be offset by credits for lower-income families.
Obama's proposals, which include a $50 billion stimulus package and expanding and extending unemployment benefits, represent pretty standard Democratic fare when taken as a whole, according to Harris.
"Relative to the current Democratic Party, Obama falls somewhere pretty close to the middle," he said.
Obama has taken to criticizing McCain on economic policy by saying he "wants to add $300 billion more in tax breaks and loopholes for big corporations and for the wealthiest Americans." He points specifically to $1.2 billion in tax breaks for Exxon, "a company that just recorded the highest profits in history."
The Exxon tax breaks he mentions, however, don't appear to have resulted from some specific exception for the company, but are included in preexisting across-the-board corporate tax cuts. When we asked about Obama's claim, McCain spokesman Tucker Bounds hit back with this: "In 2005, Barack Obama was the only candidate in this race to vote for Vice President Cheney's energy bill, which provided billions of dollars of direct subsidies for big companies like Exxon Mobil. So for him to take issue with John McCain's position of keeping taxes low makes no sense and ignores his record."