Candidates' tax-cut rhetoric swamps voters

The candidates' tax plans

According to the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution, the tax proposals offered by John McCain and Barack Obama would reduce taxes, McCain's by $4.2 trillion over 10 years and Obama's by $2.9 trillion. That doesn't count recently announced temporary measures. Highlights of the plans:

Income taxes

McCain: Make permanent the Bush administration's tax cuts, which are scheduled to expire in 2010; has called for increasing the exemption for dependents by $500 per year until it reaches $7,000 in 2016.

Obama: Restore pre-Bush rates for individuals making more than $200,000 and families above $250,000, thereby increasing rates in the upper two tax brackets to 36 and 39.6 percent; favors giving everyone else — 95 percent of working Americans, Obama says — a tax cut amounting to $500 per individual or $1,000 for a family, for anyone who files a tax return, including people who had no income-tax liability; wants to eliminate income taxes for seniors making less than $50,000 per year; favors making workers with high incomes pay more in Social Security taxes, although he has not laid out details.

Both: Would prevent alternative minimum tax from affecting more taxpayers that it does now, but neither would eliminate the tax.

Capital-gains taxes

McCain: Advocates retaining current setup, under which no one pays more than 15 percent in tax on capital gains and dividends.

Obama: Would raise rate to 20 percent for individuals making more than $200,000 and families with incomes of at least $250,000.

Business taxes

McCain: Wants to phase in reduction in top corporate tax rate from 35 to 25 percent; would allow businesses to deduct cost of equipment purchases in one year, rather than over three- or five-year timetable.

Obama: Increase personal income-tax rates at top of income scale, raising taxes for small businesses that net more than $200,000 in a year (fewer than 5 percent of such businesses reported enough income last year to be affected, according to Internal Revenue Service data); has talked of eliminating capital-gains taxes for small businesses and start-ups.

Both: Make current research and development tax credit permanent.

Estate taxes

Now: Amount of an individual's estate that is exempt from federal taxation at death varies from year to year, as does rate. Exemption is $2 million and increases to $3.5 million next year. It disappears entirely in 2010, only to reappear the following year.

McCain: Wants permanent exemption of $5 million and tax rate of 15 percent, the same as the capital-gains rate.

Obama: Wants exemption of $3.5 million and rate at 45 percent — the current figure.

Temporary measures

McCain: Has proposed cutting tax on long-term capital gains for 2009 and 2010, from 15 to 7.5 percent; would raise maximum amount of capital losses an individual may deduct in 2008 and 2009 from $3,000 to $15,000; would lower tax rate on retirement-fund withdrawals for older people to 10 percent on the first $50,000 withdrawn.

Obama: Wants to give $3,000 tax credit to companies for each new job they create in 2008 and 2009; would let families withdraw up to 15 percent ($10,000 limit) from tax-advantaged retirement accounts through end of next year without usual penalties for early withdrawal.

Both: Would suspend taxes on unemployment benefits.

The Philadelphia Inquirer