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CAMPAIGN '08: RACE FOR THE WHITE HOUSE

Candidates' tax plans criticized

July 24, 2008|Stephen Braun | Times Staff Writer

WASHINGTON — The competing tax plans laid out by Sens. Barack Obama and John McCain would both add trillions of dollars to the national debt and could add to the tax system's complexity, a nonpartisan tax research group concluded Wednesday in a newly released report.

Both campaigns assert that their plans to continue many Bush-era tax cuts and offer new reductions would aid the economy without massive new spending. But the Washington-based Tax Policy Center warned that under either candidate, "the debt would likely continue to rise as it has over the past eight years."

Obama's plan -- cuts targeted to middle- and low-income Americans and increases for the wealthy -- would increase the national debt by an estimated $3.4 trillion in the next decade, the center said. Under a similar analysis, McCain's plan -- largely a continuation of Bush's tax reductions -- would add $5 trillion. The deficit is now $9.5 trillion.

Both candidates would maintain the Bush tax cuts for the working poor and middle-income taxpayers. But they differ drastically on how to target the richest Americans.

For The Record
Los Angeles Times Wednesday, July 30, 2008 Home Edition Main News Part A Page 2 National Desk 1 inches; 37 words Type of Material: Correction
Tax plans: An article in Thursday's Section A about the presidential candidates' tax proposals and the effect they would have said the deficit was $9.5 trillion. That figure is the overall federal debt, not the yearly deficit.

The report estimated that under McCain's plan, Americans who make between $38,000 and $66,000 a year would see average tax cuts of as much as $1,400 in 2012. But the Arizona Republican would aid the wealthiest 1% -- those who make more than $603,000 per year -- with annual tax reductions averaging $127,000.

Under Obama's plan, the tax center said, middle-income taxpayers would have tax cuts averaging $2,100 in 2012. But the top 1% of taxpayers would see steep increases -- $38,000 a year, on average -- under the Illinois Democrat's plan.

Leonard E. Burman, a Tax Policy Center senior fellow who was on the team that reviewed the candidates' plans, said in an interview that important portions of both plans had yet to be fleshed out.

Both proposals are filled with "soft numbers" and sometimes play "fast and loose with their figures," Burman added.

"We had to make a lot of assumptions because there are big parts of their proposals that are still being fine-tuned," he said.

Burman also said that although both candidates' plans attempt to streamline the tax system, they create potential new complexities. Both Obama and McCain would continue the alternative minimum tax, or AMT, long criticized for adding to the tax bite and complexity for middle-class and many upper-middle-class taxpayers.

McCain would allow taxpayers to circumvent the AMT with an "optional alternative tax system" that could cause new chaos.

"If the new alternative tax system does not offer significant tax cuts, having to figure taxes under two systems and estimate which one would be better would add complexity, not reduce it," the center cautions.

And although Obama seeks to aid low-income taxpayers by having the government prepare tax returns that the taxpayers would then approve, he has only committed vaguely to "fiscally responsible" reform of the AMT, the center notes.

Another concern, Burman noted, is that Obama and McCain have presented "somewhat differing" versions of their plans on the campaign trail than what they have issued on the Web and in position papers.

"Sen. McCain's proposals on the stump are often far more sweeping than the more measured options outlined by his campaign," the center said. At the same time, "Sen. Obama also often proposes new taxes on high-income households to extend Social Security solvency, but his staff insists that no specific policy exists."

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stephen.braun@latimes.com

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