But the American sage didn’t define who should pay, and how much. Seniors, students, blue-collar workers and business owners all play different roles in the economy. This debate over what’s fair and what’s best for Uncle Sam continues in coffee shops, at the water cooler, and often boils over on the 2008 campaign trail.
According to local university professors, the straight skinny on presidential hopefuls Barack Obama and John McCain’s tax plans lies beyond their rhetoric and Web sites.
Obama’s Web site says his plan would reduce taxes for 95 percent of Americans. Dr. Larry Woodward, professor of finance at the University of Mary Hardin-Baylor, calls this idea smoke and mirrors.
“Almost half of the people in the United States don’t pay any income taxes anyway. That 50 percent of the population who doesn’t pay any (income) taxes, they are going to get a rebate, or transfer, from the government. They’re going to get a check ... and the money they’re going to get from the government is going to be from the extra taxes that the wealthy pay,” Woodward said. “So, that’s essentially a transfer of wealth from those who are making a lot to those who aren’t making very much. That is the epitome of socialism. We are really whacking those people who are working hard and making a lot and rewarding those people who aren’t producing a lot.”
McCain claims on his Web site that by repealing the Alternative Minimum Tax, he will save an average of $2,700 for about 25 million middle class families.
But Bruce Bolick, professor of accounting at UMHB, said there was very little difference between McCain and Obama regarding the Alternative Minimum Tax. Bolick said tampering with a program that increases exemptions to allow for inflation would be political suicide.
Regarding estate taxes, Obama’s plan would tax heirs at a higher rate than McCain’s. Dr. Woodward said this is unfair. He calls it double taxation.
“My understanding on the theory behind the estate tax is it’s a way to prevent the concentration of wealth. The less concentration of wealth, the greater potential growth in the economy because you’re going to have the wealth spread out,” Dr. Woodward said. “There’s a lot of debate on whether or not that’s actually true. I don’t follow that line of thinking. Even though wealth has become more concentrated in some ways everybody in the U.S has become much, much more wealthy than they were 50 years ago.”
Dr. Woodward calls Obama’s plan to eliminate taxes for seniors making less than $50,000 pandering to a voting bloc. He says everyone should pay some income tax.
“If you don’t pay any income tax, I don’t care what level of income you are, then you’re not interested in what the government actually spends the money on,” Woodward said. “But if you have to pay, you’ll be more interested in holding Congress’ feet to the fire on what they’re spending that money for.”
For more help understanding the candidate’s tax plan, and how it will affect them, voters can go to the Urban-Brookings Tax Policy Center on the Web at www.taxpolicycenter.org.
The center reports Obama and McCain have starkly different ideas on tax cuts.
“McCain’s tax cuts would primarily benefit those with very high incomes,” the center reports. “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.”
As for Obama, the center says he “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.”
Regardless who will benefit most from the candidates’ tax plans, one thing is clear: The federal government would take a big hit. According to the center, McCain’s plan would reduce federal tax revenue by $3.6 trillion and Obama’s plan would reduce it by $2.7 trillion over the next 10 years.
Editor’s note: This is the third in a series about where John McCain and Barack Obama stand on issues that affect Central Texans.
