Non Socialist

The Heritage Foundation’s Center for Data Analysis has conducted an in-depth study comparing the tax policies of the two leading Presidential contenders, Senators Barack Obama (D-Ill.) and John McCain (R-Ariz.).

Unless lawmakers act, the 2001 and 2003 tax cuts will expire, raising taxes on millions of Americans and threatening economic growth. This is of particular concern at a time of economic weakness, Heritage experts Bill Beach, Karen Campbell, Rea Hederman and Guinevere Nell argue.

The two plans share several key features: both keep portions of the 2001 and 2003 tax cuts in place; both would help prevent “bracket creep” under the Alternative Minimum Tax; both add to the federal deficit; and both would allow more economic growth than if the tax cuts fully expired.

But there are also key differences. For example,

• Extension of the 2001 and 2003 tax cuts. While the McCain plan would keep taxes at their current low rates, “Senator Obama’s does not extend the cuts for the top two rates.” In addition, the Obama plan includes a new Social Security surtax on those earning more than $250,000.

• New Tax Cuts. “Senator McCain has proposed a few other cuts, highlighted by a cut in the corporate tax rate and a change in the tax treatment of health care.”

• Health Care. Senator McCain’s tax plan for health care would end preferential treatment of employer-provided insurance “and replace it with a tax credit that would allow families to purchase health insurance.”

• Tax Credits. “Senator Obama has many new proposals, including several new tax credits. Senator Obama proposes a refundable health care tax credit to help low-income individuals purchase health care.”

The effects of the Obama and McCain tax plans

After conducting their careful economic analysis using tax models and outside economic data, Heritage’s experts made a few important conclusions about the plans’ differing effects:

· Jobs respond more to McCain’s plan than to Obama’s.

· Overall economic activity more vigorous under McCain’s plan.

· More after-tax spending potential under McCain than under Obama.

In sum, “Senator McCain’s plan is substantially better at spurring economic growth than Senator Obama’s. This is not surprising, since Senator McCain focuses on economic growth and job creation while Senator Obama focuses on the redistribution of income.”