Wealth is key in candidates' tax platforms

Conservative economists caution that Obama's tax hikes on the wealthy and corporations would increase the drag on the sluggish economy. "It would lead to disincentives for savings and productivity," said Alan D. Viard, a former senior economist at the Federal Reserve Bank of Dallas who is now a resident scholar at the conservative American Enterprise Institute. "Over time, it would mean less capital accumulated and would ultimately force wages lower."

Former Clinton administration Treasury Secretary Lawrence H. Summers waved off those concerns in a recent Obama campaign conference call, recalling that similar conservative alarms preceded a "seven-year stretch" of good times during the Clinton years. "The Obama tax plan is to be preferred on grounds of [tax] equity," Summers said. "And because it's more fiscally responsible, it is also likely to lead to better economic growth."

But economists on both sides of the debate acknowledge that strong Democratic gains expected in Congress might lead to an Obama-like tax structure even if McCain wins the White House.

"A lot of this debate could turn out to be academic," Viard said, "if a Democratic Congress won't extend the Bush tax program."

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steve.braun@latimes.com

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About this series

Voter anxiety over the weakening economy and other problems is a central feature of the 2008 presidential election. This series will examine how the candidates are responding to the discontent and how they would approach the country's biggest challenges.

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How their tax plans compare

Individual income taxes

McCain: Would make permanent the Bush tax cuts and a top individual rate of 35%.

Obama: Would make Bush cuts permanent for the poor and middle class up to $250,000 a year.

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Corporate taxes, capital gains and dividends

McCain: Would phase out the two highest corporate tax rate brackets, 35% and 34%, leaving only the 15% and 25% brackets.

Obama: Would keep corporate rates. Would raise capital gains and dividend rates to 20% for two highest income tax brackets.

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Estate tax

McCain: Would raise the untaxed exemption from $3.5 million to $5 million in 2009 and reduce the estate tax rate on remaining wealth from 45% to 15%.

Obama: Would maintain the estate tax as mandated by Congress, with an untaxed exemption of $3.5 million and remaining wealth taxed at 45%.

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Sources: Tax Policy Center and Obama and McCain campaigns