The Consequences of The Candidates’ Tax Plans

Earlier I noted how Republican claims of higher social security taxes under Obama are greatly exaggerated. Later in the day a study came out from the Tax Policy Center comparing the effects of the tax policies of both candidates. (Full report here in pdf format.)

The graph above gives a quick look at who benefits the most from the policies of each candidate. Not surprisingly, those in the lowest quintile get the biggest breaks under Obama’s plan while those in the top one percent get the biggest tax breaks from McCain.

Those results could have been predicted easily. The more interesting question for myself was how the tax plans would affect all us more affluent “elitists” who back Obama. The Republicans will try all sorts of scare tactics to convince the upper middle class to return to voting for them even though in recent years their economic policies have not been of benefit to the upper middle class.

Hilzoy’s analysis helps answer this question, along with a review of the data on pages 22-24:

The cutoffs for these quintiles (in 2008 dollars) are as follows: “20% $19,740, 40% $38,980, 60% $69,490, 80% $117,535, 90% $169,480, 95% $237,040, 99% $619,561, 99.9% $2,832,449.” (p. 24.) It’s worth noting that if you check the table on p. 24, which has more detail than this graph, you can see that people below the top five percent (which starts at $237,040) do not lose after-tax income under Obama’s plan, and people making $237,040-$619,561 lose all of $12 a year, on average. It’s only in the top one percent that people take a sizable hit. But since so much of the Bush tax cuts went to them, that seems fair to me.

Based upon these numbers, it doesn’t look like the bulk of the affluent voters who are supporting Obama are going to pay more in taxes. We might receive a bit more of a tax break from McCain, but the bulk of his tax breaks go to those in the top 0.1%. For example, looking at the 90-95th percentile, Obama’s plan provides an average tax cut of $2789. McCain’s plan gives an average tax cut of $4380.

It is doubtful things would ever turn out exactly as these predictions state, but if we go by these numbers the upper middle class does do slightly better under McCain than Obama. Personally I’m willing to go with the slightly lower tax cut if it means a better chance of ending the war and undoing the other harm committed under George Bush. Despite all the scare tactics used by Republicans, we are not really talking about that much money considering the income of this group.

Of course we can expect the ultra-wealthy to go for McCain, provided they vote purely based upon taxes and not on what is best for the country. The top 0.1% receives an average tax cut of $269,364 from McCain while they would see an average tax increase of $701,885 under Obama. (Again, this is largely a consequence of them receiving the largest benefits under Bush’s plan). On the other end of the spectrum, McCain would give the lowest quintile an average tax cut of $19 while Obama would give them an average tax cut of $567.


  1. 1
    DLF says:

    Obama’s plan is a recipe for disaster.  Based upon what has happened in the last year, there will be less people making $250k or more – capital gains are pretty much gone and will be managed down to nothing by taking capital losses with the stock market drop.  With less people paying, there will be more people taking, thus Obama’s projections are, in a fluid world, already invalid.

    McCain can’t seem to get the point across very well, but you just don’t raise taxes in a recession.  The only time it happened was in 1932 when the depression was easing and Hoover raised taxes and sent the economy into the tank.  Now I am not saying there will be a depression, but it will prolong any recession.

    Further, I think the government should be focused more on saving versus spending, by giving rebates, whatever, you just foster spending.  Yes, Obama’s plan has a savings credit, but that will be abused.  Even lower income individuals can figure out how to game the system.

    I just don’t like the gov’t taking my money.  With all taxes (local, state, fed, and I get the honor of paying AMT) I pay just slightly less than 40% – not on the margin but against all earnings.  It is rediculous.  Under Obama, that will rise by a another 2%.

    Let’s recall – the Bush Tax Cuts were tacitly approved by the Democrats, the fact is the Senate could have been filibustered if they were that strongly against it.  I just hope the Republican Senators will do what they can to stop his transfer of wealth. 

  2. 2
    Ron Chusid says:

    You are making a stronger argument for Obama than McCain. If you support lower taxes during recession, then you should definitely vote for Obama. While Obama is offering a wide based tax cut, McCain is offering a tax cut primarily to those making over $600,000 per year. Obama’s plan will do much more to revive the economy.

    It doesn’t make any sense to declare Obama’s projections invalid and accept McCain’s since independent analysis of the two plans have found that McCain’s plan is far more unrealistic, adding far more to the deficit than Obama’s. Obama has already said he would scale back on spending if needed based upon economic conditions.

    You have your history wrong on the Bush tax cuts. Bush wanted to give a tax cut only to the rich. The Democrats used their power in Congress to force him to add on a tax cut for the middle class. The Democrats had the vote to force concessions from Bush but not to totally determine the tax plan.

  3. 3
    DLF says:

    I appreciate your reasoned response.  I think when we get into tax cuts for the rich versus poor it is all in your perspective.  With the top 5% paying (depending upon who you beleive) 50 to 60% of all taxes and approximately 30% of all Americans paying no taxes it just dpends upon what you view as “fair”.  Some state that with Obama’s plan the number of people paying no taxes could rise to 50%.  Not sure that is fair.

    To be honest, I don’t beleive either of them.  If we really look at how political parties have morphed over time, the Republicans today are like the Democrats of 40 years ago.
    I just don’t like how the politics of today are moving to less and less personal responsibility and the overall dependence upon government people are asuming.

    To be honest, I am a Libertarian – fiscal responsiblity with liberal personal freedoms.  I think most Americans really fall into this category, but the 2 party system keeps a viable Libertarian Candidate out.

    I agree that Bush has in many aspects been a disaster, but the fact of the matter the President gets too much blame or credit for things in general.  He may set the direction, but he still has to get Senate/Congressional approval – that’s where earmarks come in.

    The thing that distresses me is the fact that civil discussion has dropped off the face of the political scene.  Both sides are too extreme.  Try as I might, I cannot understand the liberal mindset regarding government, just as I am sure you cannot understand the conservative mindset.  That doesn’t make either of us stupid or ignorant, it just makes us different.  Isn’t that a critical component of the how the US works?  I think so.

  4. 4
    Ron Chusid says:


    Bush cannot control everything (such as earmarks) but he is directly responsible for many of the negative things which have occurred. His reckless foreign policy is responsible for weakening the United States and greatly reducing the country’s influence in the world. He is responsible for both the war in Iraq and escalation of the drug war. He is responsible for setting a course towards reduction of civil liberties. He is responsible for breaking down separation of church and state. He is responsible for breaking down the protections provided by separation of powers as he grabbed far too much power for the executive branch.  Bush (and other Republicans) are responsible for a tremendous increase in government interference in individual’s lives. He and his party are responsible for undermining the free market system and using government as a means to transfer wealth to the ultra-wealthy.

    By understanding the conservative mind set, are you speaking of traditional conservative views or what is being practiced by today’s conservatives? I understand conservative views quite well–and as even many conservatives admit there is little similarity between what is being practiced by conservatives in power and conservative ideas. (It might be argued that this is partially a fault in conservative ideology which leads to its practice being far different from conservative thought, just as the practice of Communism turned out to be radically different from what its proponents advocated.)

    With regards to taxes, you are right that the plans of neither candidate totally add up and we will not see exactly what they advocate once in office. (I’ve had a number of posts on this in the past). What we do know based upon nonpartisan analysis is that 1) McCain’s plans are far worse than Obama’s with regards to increasing the deficit and 2) McCain’s plans are geared towards providing benefits to the top one tenth of one percent while Obama’s plans are geared towards providing tax breaks to far more people and businesses. While the details will undoubtedly be different once in office, these broad differences between the two will still be seen.

    Obama is certainly not a libertarian, but he is one of the most libertarian candidates we have had in modern times and at least he isn’t a hyper-nationalist supporter of big government such as McCain. As a pragmatist influenced by the University of Chicago on economic matters and with his background in Constitutional law his policies do shift us away from the policies of the authoritarian right towards less government involvement in our lives and greater freedom. There is good reason why Obama has the support of so many libertarians (if we exclude the brand of libertarians who are simply “Republicans who have smoked marijuana” and not really libertarian.)

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