August 15, 2008
GOP Presidential Candidate Focuses on Economic Incentives, Democrat Advances Redistribution
Washington, DC, August 15, 2008 - New analysis of the major presidential candidates' tax policy show stark differences in approach and outcome.
In Tax Foundation Fiscal Fact No. 137, Robert Carroll, Vice President for Economic Policy at the Tax Foundation, examines tax relief proposals from Sen. John McCain (R-AZ) and Sen. Barack Obama (D-IL). With the economy as one of the top issues among the American electorate this presidential election cycle, both candidates have been using the issues of health care, gas prices, and housing devaluation, among others, to preface their economic proposals. But Carroll explains that the candidates have significantly different tax policies that address these issues.
"Senator Obama has included a set of carefully targeted tax proposals that narrowly aim benefits to specific types of taxpayers, while Senator McCain provides broad tax relief with benefits that are indirect," says Carroll. "In both cases, tax relief is provided to the vast majority of the electorate."
Looking at the tax provisions put forward by McCain and Obama, along with the cost of each as estimated by the Urban-Brookings Tax Policy Center, McCain only has two proposals that directly affect individuals: the expansion of the dependent exemption and a new health care tax credit. On the other hand, Obama provides seven proposals for individuals that target housing, education, child care, and low-income work.
Differences are also stark in business taxation. While Obama proposes a small business health tax credit as well as permanent extension and expansion of the research and experimentation credit, McCain's proposals are much more expansive, including a reduction in the corporate tax rate from 35% to 25% and a write-off of business investment in equipment. McCain's lower corporate tax rate recognizes that the United States' business tax system, with the second-highest corporate tax rate among industrialized nations, may be becoming uncompetitive in a global marketplace.
Carroll explains that, in simple terms, Obama focuses on redistribution and McCain focuses on improving economic incentives. Also, one still needs to take a more holistic approach and consider the full breadth of their tax plans.
"Senator Obama provides tax relief directly to individuals, without making major changes in how the tax system interacts with or affects individual and business decision making," explained Carroll. "Senator McCain provides broad tax relief and channels most of it to businesses, with the notion that the best way to help workers is to encourage investment and ensure that the U.S. remains competitive in the global marketplace."
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
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To set up an interview to discuss the tax policies of both major presidential candidates, please contact Matt Moon, the Tax Foundation's Manager of Media Relations, at (202) 464-5102.