Tax Policy Center understates cost of McCain tax cuts

This article was on the front page of Yahoo.

http://biz.yahoo.com/cnnm/080611/061108_candidates_taxproposals_tpc.html

It's not too bad. It does make the point that the rich get many more benefits from McCain tax plans, although it also uses the "average taxpayer" canard which is a typical Bush trick. Give 99,000 people $1 and give 1,000 people $100,000 and bang, the "average" person is getting over $1,000 tax cut even though 99% of them are only getting $1.

Thus, these two lines deceivingly make McCain's tax plans look much more generous than Obama's even though the article goes on to talk about the highest and lowest income groups.

"The net result: compared with their tax bill today, taxpayers on average would see their tax bill cut by nearly $1,200. That means their after-tax income would rise by 2%.

...

The net result: compared with their tax bill today, taxpayers on average would see their tax bill cut by nearly $160 under Obama's plan. That means their after-tax income would rise by 0.3%."


The truth is that Obama's plan is much more generous for families making less than $50,000, about the same for families making $50-100,000 and McCain is more generous for families making over $300,000

Also, this does not seem accurate:

"In addition to making the 2001 and 2003 tax cuts permanent, McCain says he would double the exemption for dependents, lower the corporate tax rate, make expensing rules more generous for small businesses and lessen the bite of the estate tax and Alternative Minimum tax."

According to his website, currently McCain is calling for "repeal" of the AMT, not "lessen the bite". From his website:

"John McCain Will Cut Taxes For Middle Class Families. John McCain will permanently repeal the Alternative Minimum Tax (AMT) – a tax that will be paid nearly exclusively by 25 million middle class families. "

See my signature line for a summary of who benefits from that (contrary to the lie McCain tells, it's not the middle class).

Since McCain does not give details about this proposal, it's not clear who it will benefit:

"John McCain Will Propose An Alternative New And Simpler Tax System – And Give America A Real Choice. 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."

However, reducing the number of tax rates, doesn't simplify anything. People making less than $100,000 are only reading a table no matter how many rates there are, and people making more only perform three calculations (from 2002 - $94,720 + 38.6% of the amount over $307,050, but the IRS has now reduced that to two 38,6% of income minus $23,801.3.) What reducing the number of rates does do, is reduce the progressivity of the income tax. Typical of Republicans it means tax cuts for the rich.

Finally I would like to see their numbers for this:

"Under both plans, all American taxpayers could pay a price for their tax cuts: a bigger deficit. The Tax Policy Center estimates that over 10 years, McCain's tax proposals could increase the national debt by as much as $4.5 trillion with interest, while Obama's could add as much as $3.3 trillion."

Since Obama and McCain are almost the same for families making under $150,000 and Obama includes tax increases for families over $250,000 then the difference should be more than $1.2 trillion. That difference may result from the Tax Policy Center ignoring McCain's call for AMT repeal, because the AMT recaptures some of the tax cuts that otherwise go to people making over $250,000.

the report is here:
http://www.taxpolicycenter.org/publications/url.cfm?ID=411693

they start with this:

"One of the challenges facing anyone who wants to estimate the effects of candidates’ tax plans is that no one—not even inside the campaigns—knows exactly what the proposals are. Stump speeches and campaign white papers are often short on the technical details needed to analyze the proposals fully. In addition, the candidates’ plans are often works-in-progress that change during the course of a campaign."

I like this line from their summary too, about Obama's plans:

"However, he would also direct new subsidies at an already favored group-seniors -and an already favored activity-borrowing for housing-which could probably be better directed elsewhere."

But both of those are politically astute, since seniors and home owners are huge voting blocs.

In another article they mention the repeal of the AMT, which a smiling McCain spokesperson emphasised on PBS's NewsHour. That adds $1 trillion to McCain's deficit.

http://taxvox.taxpolicycenter.org/blog/_archives/2008/4/17/3644448.html

The reports are gemerally very good, but the Yahoo article summarized it in a way to favor McCain. Score another one for the So-Called Liberal Media. That "average" nonsense should never have been included. Better to break it down into four groups - below $50,000, $50-100,000, $100-250,000, and over $250,000. Including the top group in the average just pulled the average up for McCain and down for Obama.