The Tax Policy Center Report--Analyzed

"The income tax has made more liars out of the American people than golf has." ~ Will Rogers

When I pointed out media bias on a previous post, I reported that the Tax Policy Center was a Liberal organization, but I didn't read their data.

Now that I've read the Tax Policy Center's report on the two Presidential candidates tax plans, I still don't understand it much, but the Associated Depressed reports that Obama's plan, according to the Tax Policy Center, is better.

It doesn't look like that to me. Let's examine the report, shall we? Here (the text of the report in italics), are some excerpts:

Senator McCain would permanently extend the 2001 and 2003 tax cuts, increase deductions for taxpayers supporting dependents, reduce the corporate income tax rate, and allow immediate deductions for investments in certain capital equipment.

Sounds good to me.

Senator Obama would permanently extend certain provisions of the 2001 and 2003 tax cuts primarily affecting taxpayers with incomes under $250,000 but repeal the cuts in the top two marginal income tax rates ahead of their scheduled expiration in 2010; increase the maximum rate on capital gains; raise the top tax rate on qualified dividends from its current level (but keep it below pre-2001 levels); and enact new and expanded targeted tax breaks for workers, retirees, homeowners, savers, students, and new farmers.

I like the part about tax breaks for workers, etc, but more about that later.

Senator McCain proposes to extend permanently and increase the AMT "patch" that has prevented most individuals and families with incomes below $200,000 from being affected by the tax and lowered the tax for others, and in our interpretation of his proposal, Senator Obama would also extend the patch.

"[O]ur interpretation". That means Liberally biased opinion. Remember, the Tax Policy Center is a Liberal organization.

Each candidate would also increase the estate tax exemption and reduce the estate tax rate compared with current law in 2011 and beyond, although Senator McCain would cut the tax much more than Senator Obama.

This says Obama's plan is better?

Finally, each candidate promises to broaden the tax base and reduce corporate loopholes. McCain lists eight breaks for oil companies as targets but, other than that, is short on details for his pledge to eliminate "corporate welfare." Obama identifies a variety of steps, including basis reporting for capital gains (I have no idea what this means), taxing carried interest as ordinary income, and enacting sanctions on international tax havens that don't cooperate with enforcement efforts, but he would also need additional as-yet-unspecified policies to achieve his revenue target for base broadening.

So, the Tax Policy Center is a little fuzzy on some details. Should we just go ahead and throw the entire report out now for it's inaccuracies?

Although both candidates have at times stressed fiscal responsibility, their specific non-health tax proposals would reduce tax revenues by an estimated $4.2 trillion (McCain) and $2.9 trillion (Obama) over the next 10 years....

The Tax Policy Center says, "Although ...stressed fiscal responsibility..." I have to say, does the Tax Policy Center believe reducing taxes is not a good thing?

Against current policy, Senator Obama's proposals would raise $600 billion and Senator McCain's proposals lose a similar amount.

This is, of course, conjecture colored by an obvious Liberally biased organization. Depending upon the individuals perspective, doesn't this mean Obama's tax policy would cost the taxpayers $600 billion more in taxes and McCain would save them that much? That is about a 1.2 trillion dollar swing by my estimation . How is that a bad thing?

The two candidates' tax plans would have sharply different distributional effects. Senator McCain's tax cuts would primarily benefit those with very high incomes, almost all of whom would receive large tax cuts that would, on average, raise their after-tax incomes by more than twice the average for all households. Many fewer households at the bottom of the income distribution would get tax cuts and those tax cuts would be small as a share of after-tax income.

Let us not forget that most lower income households in America don't pay any tax at all! They have taxes deducted from their paychecks, but at the end of the year, if they file income tax forms, they get more than they paid refunded to them.

By the way, I don't pay income taxes at all, and, at the end of the year, I get a substantial refund. That's because I am self employed, and my allowable deductions amount to more than my income.

In marked contrast, Senator Obama offers much larger tax breaks to low and middle-income taxpayers and would increase taxes on high-income taxpayers. The largest tax cuts, as a share of income, would go to those at the bottom of the income distribution, while taxpayers with the highest income would see their taxes rise significantly.

How does one offer tax breaks to people who don't pay taxes in the first place? And, uh... high income taxpayers would see their hard earned money taken from them to be shared by low income families!

This is Marxist collectivism straight out of the Communist Manifesto!

The impact of the tax code on economic activity under each candidate's policies would differ in several important ways. Under Senator McCain's proposed policies, the top marginal rates (35 percent on individual income and 25 percent on corporate income) would be significantly lower than under Senator Obama's plan (39.6 and 35 percent, respectively). McCain's reduced individual and corporate rates could improve economic efficiency and increase domestic investment, but the larger future deficits would reduce and might completely negate any positive effect.

Hmmm. Raising taxes on corporate income...Does anybody seriously believe corporations would absorb higher taxes without passing the added expense on to the consumer? In my opinion, the net effect of raising taxes on corporate income would only succeed in raising prices in the marketplace.

The possibility that Americans will spend more with less income defies logical comprehension.

In contrast, Senator Obama's proposed new tax credits could encourage desirable behavior, particularly if the childless EITC and payroll tax rebate encourage additional labor supply among childless low-income individuals.

Huh? How? Why?

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

Finally, the Tax Policy Center admits Obama is fallible!

In several important ways, the candidates' speeches and web sites differ from the plans as we've outlined them above, and, in several cases, descriptions of proposals provided by campaign advisers strike us as implausible.

Senator Obama says he would subject high-income taxpayers to additional taxes "in the range of 2 to 4 percentage points more in total (combined employer and employee)" starting "a decade or more from now" to help shore up Social Security. Nonetheless, his campaign advisers insist that there is no specific proposal. We estimated the cost of Senator Obama's proposals assuming that the Social Security proposal would impose a 2 percent income tax surtax on adjusted gross incomes over $250,000 and a 2 percent payroll tax paid by employers on employees' earnings above that threshold and that all of the provisions-including the higher payroll tax-are fully effective immediately. Under those assumptions, the Senator's proposals would reduce revenues by $2.6 trillion over 10 years, or about $390 billion less than the proposals as described by his campaign advisers.

There you have my Conservatively biased attempt at analyzing the Liberal Tax Policy Center's assessment of both Presidential candidates tax plans.

Although, being an economical moron, I may have misunderstood.