Obama & McCain on taxes and the economy.

Will Obama or McCain's proposal tax home sales more? What about capital gains? With “both John McCain and Barack Obama offering tax cuts,” according to the Christian Science Monitor, “the 2008 election promises a boost for the typical family budget” regardless. But the myths require debunking - smears circulate in email misrepresenting the differences - sometimes deliberately. Facts help...

"New Tax" Falsehoods: One e-mail in particular contains a string of made-up taxes that it falsely claims Obama has proposed. He has not proposed a tax on new homes with more than 2,400 square feet, or a new gasoline tax or a tax on retirement accounts. The most laughably false claim is that Obama would tax "water." But it's out there, and in covering it the media echoes it... Want more facts?

• Capital Gains Rate: It's untrue that Obama is proposing a 28 percent capital gains tax rate. He said in an interview on CNBC that he favors raising the top rate on capital gains from its present 15 percent to 20 percent or more, but no higher than 28 percent. And as for a 28 percent rate, he added, "my guess would be it would be significantly lower than that."
• Tax on Dividends: Another false claim is that Obama proposes to raise the tax rate on dividends to 39.6 percent. Dividends currently are taxed at a top rate of 15 percent, and Obama would raise that to the same rate as he would tax capital gains, somewhere between 20 percent and 28 percent but likely "significantly" lower than 28 percent. This higher tax also would fall only on couples making $250,000 or more or singles making more than $200,000.
• Taxing IRAs and 529s: Contrary to email rumors, raising tax rates on capital gains or dividends would not result in higher taxes on any investments held in Individual Retirement Accounts or in popular, tax-deferred "college funds" under section 529 of the Internal Revenue Code. The whole point of such tax-deferred plans is that dividends and capital gains are allowed to accumulate and compound tax-free, and neither Obama nor McCain proposes to change that. And as previously mentioned, any capital gains or dividend income from stocks, bonds or mutual funds owned outside of tax-deferred accounts would continue to be taxed at current rates except for couples making over $250,000, or singles making more than $200,000
• Doubled Taxes? The claim that "Under Obama your taxes will more than double!" is also false. Do you really need to ask? The comparative rate tables one e-mail smear provides for McCain and Obama are entirely wrong, as explained in a March 13 article about another false e-mail (from which the tables are copied.) It is supposedly a comparison of tax rates before and after the Bush tax cuts, but it grossly overstates the effect of the Bush cuts. Obama actually proposes to retain the Bush cuts for every single income level shown in the bogus table.
• Estate Tax. The claim that Obama proposes to "restore the inheritance tax" is also false, as are the claims that McCain would impose zero tax and that Bush "repealed" it. McCain and Obama both would retain a reduced version of the estate tax, as it is correctly called, though McCain would reduce it by more.
  
  The tax now falls only on estates valued at more than $2 million (effectively $4 million for couples able to set up the required legal and financial arrangements). It reaches a maximum rate of 45 percent on amounts more than that. It was not repealed, but it is set to expire temporarily in 2010, then return in 2011, when it would apply to estates valued at more than $1 million ($2 million for couples), with the maximum rate rising to 55 percent.
  
  Obama has proposed to apply the tax only to estates valued at more than $3.5 million ($7 million for couples), holding the maximum rate at 45 percent. McCain would apply it to estates worth more than $5 million ($10 million for couples), with a maximum rate of 15 percent. I wonder how that difference relates to the assessed value, or anticipated selling price, of the best of the McCain homes...

Why all the misinformation?

Some of it's based on simple confusion. After all, Obama's not prone to cute sound-bites such as "Read my lips: No new taxes." Some of the emails circulating, however, are so consistently mis-representing the facts - facts that are easy to verify - that one can only conclude a deliberately malicious intent to strike fear in the wallets of middle class voters is behind the lies.

In an ideal setting voters would all have access to reliable, current, accurate information sources. They'd also take the time to examine that information, no matter if it was Obama's stand on taxes, McCain's statements about taxes or his speeches on why health care doesn't need the fixes Obama's proposed, or rookie Governor Palin's changing stand on the pork barrel "Bridge to Nowhere." In practice, time is short, and rumors often get as much (if not more) coverage as facts on the evening TV news or in newspapers. Futhermore it's often hard to tell which part of a story is the truth. The media producers have motives that must be examined, particularly those who profit from selling commercials since they obviously desire to make a profit. When in doubt, follow the money.

Who profits from the election of McCain or Obama -- or your mayor?

Who profits from voters feeling disenfranchised and tuning out?

The airwaves are as full of misinformation - willfully employed - as the email is. Are you ready to step up and be an Agent of change, to contribute to help spread the truth?

read more: Capital gains and taxing home sales | digg story

Tax plans: Obama vs. McCain

Let me state at the outset that you can't know. I don't just mean that politicians don't always follow through on campaign pledges, either. Among other things, circumstances change, and the economy is neither stable nor predictable, so while we may be able to discuss goals, vision, and philosophy, it's not entirely possible to figure what it will take to turn the economy in a better direction while dealing with the costs we've incurred in Iraq.

But the question is hard to answer for another reason, too. Senator McCain and his team have avoided releasing any specifics. Taylor Griffin, for instance, one of McCain's trusted, close advisors, danced away from details about Social Security, because he says McCain fears the debate might become politicized. Seriously. Here's the most beef I can uncover from Griffin or McCain:

"The history of the Social Security debate has taught that too many specifics, especially during a presidential campaign, has polarized the debate."

In contrast, if you want to know what Obama's plan is you can readily find volumes of information describing his specific positions and detailed proposals on taxes and the economy, or virtually any other issue. McCain's savvy; he's been in Washington a long time, and his team knows that the devil's in the details, so they won't give any on his website or in interviews. Clever campaigning, perhaps, but it makes it hard for a voter to make an informed choice.

Let's not dither: we're all in favor of lowering taxes and cutting federal spending, we'd all like to have more discretion in spending on what we personally favor and enjoy. Meanwhile the present budget deficit means that whoever wins the November election faces a gargantuan task leading the country out of the hole. “I will not pretend we can achieve them without cost, or without sacrifice, or without the contribution of almost every American citizen,” Senator Obama said on Monday, “But I will say that these goals are possible, and I will say that achieving them is absolutely necessary if we want to keep America safe and prosperous in the 21st century.” I'll return to Obama's New Energy speech in a bit, but in terms of taxes and the economy? Vision alone won't do it, and both candidates owe us specifics of how they'd manage the budget to overcome the deficit.

The Tax Policy Center, in a report disputed by Douglas Holtz-Eakin (arguably McCain's key economic advisor,) said that McCain's "...proposals on the stump are often far more sweeping than the more measured options outlined by his campaign." That they might as much as double the tax impact of his formal proposals, while Obama's off-the-cuff additions would reduce the impact of his plan (by roughly one-sixth, they say.)

Who can we believe? And who are we? There's nobody following the campaign who doubts Obama will champion tax policies that will impact those who earn a quarter million dollars or more in a year. Fortunately, while those folks have economic challenges, they need not worry about the price of a gallon of gas or the cost of bread, and their children will probably be able to afford any college they choose. In his "New Energy" speech on Monday (see below) in Lansing Michigan Obama, for instance, repeated his call for a windfall profits tax on oil companies while focusing on eliminating oil imports from the Middle East and Venezuela within 10 years, while McCain's speeches and press releases on energy are somewhat vague - basically, "drill now, and build nuclear plants."

Obama offers New Energy for America

So, what of the various rumors circulating in email or reports echoing in the media lately? Let's turn to a non-partisan group that has found fault with both major candidates at times, PolitiFact. Here are some highlights from their clear summary page on taxes. Click the meter(s) if you want the details on each of these "facts."

• "Obama will charge a 28% tax on all home sales."


• Obama wants to "restore" the estate tax that George W. Bush "repealed."


• McCain will keep the estate tax at 0%, the same as it is now.


• Obama will "cut taxes for working families."


• McCain July 30th, 2008 in a television ad: Obama "says he'll raise taxes on electricity."


• Tax rates were significantly higher "in the '40s, the '50s, and the '60s."


• Obama wants to "enact the single largest tax increase since the Second World War," according to John McCain on Tuesday, June 10th, 2008 in Washington, D.C.


• McCain and Bush are millionaires who are "for tax cuts for millionaires."


• John McCain on Monday, August 4th, 2008 on the Bush tax cuts.

PolitiFact is a project of the St. Petersburg Times and Congressional Quarterly to help track truth in the presidential campaign. The Times and CQ analyze the candidates' speeches, TV ads, and interviews daily to determine and report on whether the claims are accurate.

So, when you ask who will raise "my" taxes more, the answer depends on who you are. If you work for BP, or Exxon/Mobil, or if you can earn a million dollars in under four years, your personal weatlth and earning potential may suggest you support McCain (although where he finds the money to fund his admittedly vague proposals still could affect you adversely.)

Despite the fact that Obama has hired more economic advisors, McCain might need more advice.

Despite the fact that politics relies on perception, voters need facts to make informed choices. For individuals earning under a quarter million dollars a year concerned with their personal finances as a key issue, a close reading of Obama's plans probably wins the vote. Either way, McCain's claims that Obama will raise taxes are wrong.

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