Whose tax policies can your pocketbook support?

By Jason W. Harrel, Esq.

Senator Barack Obama’s website states: “I’m asking you to believe. Not just in my ability to bring about real change in Washington . . . I’m asking you to believe in yours.” With respect to Sen. Barack Obama’s proposed tax policies is that change something your pocketbook can believe in?

Senator John McCain’s website does not have a catchy tag line for his candidacy (or at least I could not locate one). Sen. John McCain’s website simply outlines his positions on various issues and what he proposes to accomplish while in office as President.

The information contained herein was found on the respective candidate’s website.

Sen. McCain’s economic plan includes a “Pro Growth, Pro-Jobs Tax Agenda.” To support this Sen. McCain’s website states the following:

“… John McCain will permanently repeal the Alternative Minimum Tax (AMT) – a tax that will be paid nearly exclusively by 25 million middle class families. Repealing this onerous tax will save middle class families nearly $60 billion in a single year. Under McCain’s plan, a middle class family with children set to pay the AMT will save an average of over $2,700 – a real tax cut for working families.”

“… John McCain believes the tax code should be less of a burden on those, whether they are mothers and fathers or single parents, who are trying to raise a family. He proposes to raise the personal exemption for each dependent from $3,500 to $7,000.”

“… Entrepreneurs are at the heart of American innovation, growth and prosperity. They create the ultimate job security – a new, better opportunity if your current job goes away. Entrepreneurs should not be taxed into submission.”

“… Left to their devices, Democrats will propose a massive $100 billion tax hike, almost $700 per taxpayer every year. John McCain has also long sought permanent and immediate reform of the estate tax, and supports raising the exemption from taxation on estates up to $10 million while cutting the tax rate to 15%.”

“… John McCain believes it should require a 3/5 majority vote in Congress to raise taxes.”

“… Low taxes on dividends and capital gains promote saving, channel investment dollars to innovative, high-value uses and not wasteful financial planning. John McCain will keep the current rates on dividends and capital gains and fight anti-growth efforts by Democrats.”

“… John McCain proposes to permit corporations to immediately deduct the cost of equipment investment, providing a valuable pro-growth investment incentive. Expensing of equipment and technology will provide an immediate boost to capital expenditures and reward investments in cutting-edge technologies.”

“… John McCain believes the taxes we impose on American companies should be no higher than the average rate our major trading partners impose on theirs. We currently have the second highest combined corporate tax rate in the industrialized world, and it is driving many businesses and the jobs they create overseas.”

“… John McCain has been a leader in keeping the Internet free of taxes. As President, he will seek a permanent ban on taxes that threaten this engine of economic growth and prosperity.”

“… John McCain understands that the same people that would tax email will tax every text message and even 911 calls. John McCain will prohibit new cellular telephone taxes.”
“John McCain Will Establish Permanent Tax Credit Equal To 10% Of Wages Spent On R&D. This reform will simplify the tax code, reward activity in the U.S., and make us more competitive with other countries…”

“John McCain Will Propose An Alternative New and Simpler Tax System … When this reform is enacted, all who wish to stay under the current system could still do so, but everyone else could choose a vastly less complicated system with two tax rates and a generous standard deduction…”

By contrast, Sen. Barack Obama’s economic plan includes a “Plan For Restoring Fiscal Discipline.” To support this plan Sen. Obama’s website states the following:

“… Obama believes that a critical step in restoring fiscal discipline is enforcing pay-as-you-go (PAYGO) budgeting rules which require new spending commitments or tax changes to be paid for by cuts to other programs or new revenue.” [Author note: “new revenue” = new or increased taxes].

“… Obama will protect tax cuts for poor and middle class families, but he will reverse most of the Bush tax cuts for the wealthiest taxpayers.” [Author note: what income level defines “wealthiest taxpayers?”]

“… Obama will cut income taxes by $1,000 for working families to offset the payroll tax they pay.” [Author note: Will your family be a “working family” qualifying for this cut?]

“… Obama will restore fairness to the tax code and provide 150 million workers the tax relief they need. Obama will create a new “Making Work Pay” tax credit of up to $500 per person, or $1,000 per working family. The “Making Work Pay” tax credit will completely eliminate income taxes for 10 million Americans.” [Author note: 10 million more Americans not paying any income taxes, that’s fair.]

“… Obama will dramatically simplify tax filings so that millions of Americans will be able to do their taxes in less than five minutes. Obama will ensure that the IRS uses the information it already gets from banks and employers to give taxpayers the option of pre-filled tax forms to verify, sign and return. Experts estimate that the Obama proposal will save Americans up to 200 million total hours of work and aggravation and up to $2 billion in tax preparer fees.” [Author note: How many jobs will be lost in the accounting field because of this?]

“… Barack Obama believes we need to double federal funding for basic research and make the research and development tax credit permanent to help create high-paying secure jobs.”
“… Obama will create a federal Renewable Portfolio Standard (RPS) that will require 25% of American electricity be derived from renewable sources by 2025 … Obama will also extend the Production Tax Credit, a credit used successfully by American farmers and investors to increase renewable energy production and create new local jobs.”

“… Obama will create a 10% universal mortgage credit to provide homeowners who do not itemize tax relief. This credit will provide an average of $500 to 10 million homeowners, the majority of whom earn less than $50,000 per year.”

“… Obama will reform the Child and Dependent Care Tax Credit by making it refundable and allowing low-income families to receive up to a 50% credit for their child care expenses.”

“… As president, Obama will reward work by increasing the number of working parents eligible for EITC benefits, increasing the benefit available to parents who support their children though child support payments, and reducing the EITC marriage penalty which hurts low income families. Under the Obama plan, full time workers making minimum wage would get an EITC benefit up to $555, more than three times greater than the $175 benefit they get today. If the workers are responsibly supporting their children on child support, the Obama plan would give those workers a benefit of $1,110.” [Author note: Coupled with Making Work Pay credit it sounds like these individuals will not be paying any tax and receiving a refund of your tax dollars].

“… Barack Obama will make college affordable for all Americans by creating a new American Opportunity Tax Credit. This universal and fully refundable credit will ensure that the first $4,000 of a college education is completely free for most Americans, and will cover two-thirds the cost of tuition at the average public college or university.” [Author note: Will you be one of the “most Americans” that this will be targeted toward?”]

The two candidates’ approach to tax policies could not be more different. While it appears that Sen. Obama wants to give tax relief to only certain individuals, Sen. McCain is proposing relief to a larger segment of our society. Do you think you will be in the lucky class to get the cuts or credits proposed by Sen. Obama or will you be one of the unlucky ones with a tax increase to support his programs and policies? Additionally, be on the lookout for clues for tax increases, i.e., “raise revenue,” “repeal tax cuts.”

In an upcoming article I will discuss proposed policies of both candidates that will have major impacts on small business owners.

In these difficult economic times, whose tax policies do you think you can afford?