The Center for American Progress Action Fund released a new report by Michael Ettlinger, Vice President for Economic Policy, showing the stark difference between the tax plans offered by Senators John McCain and Barack Obama using two real families as examples: the McCains and the Obamas. Based on information from their 2006 tax returns, Ettlinger shows, line by line, the tremendous savings offered under the Bush tax cuts. He contrasts this with the even greater savings under McCain’s plan and the substantial, albeit smaller, savings under Obama’s plan.
How Rich Are They?
Neither the McCains nor Obamas are doing badly. In 2006, the Obamas had an almost entirely earned income–the bulk coming from Senator Obama’s success as an author. The McCain’s financial situation is more cloudy. Senator and Mrs. McCain filed their returns separately — Mrs. McCain, the primary source of wealth for the family, did not disclose her entire tax record, making it more difficult to determine exactly the amount of their income. In the end, both couples are in the top 1% of all tax payers, the McCains in the top one tenth of a percent.
The Bush Tax Cut
Taking a quick glance at how the McCains and Obamas fared under the Bush tax cut, we see that both families recouped a relatively large savings under Bush’s plan in 2006 — the McCains saving 4.87% and the Obamas saving 3.85% of their annual incomes, the McCains benefiting greatly from new tax breaks on dividends and capital gains. All in all, the McCains saved over $313,000 thanks to Bush, and the Obamas saved nearly $40,000. Had Bush’s tax cuts been fully phased in, the savings would have been even greater for both families.
McCain And Obama’s Tax Plans
Senators McCain and Obama have starkly different tax proposals. McCain favors making the Bush tax laws permanent, and also plans to repeal the Alternative Minimum Tax, double the dependent exemption and offer tax breaks on business income. Senator Obama looks to reverse provisions benefiting the best-off tax payers (such as himself and Senator McCain), and retain the parts that reduced taxes for middle and lower income tax payers–offering an additional tax credit for these wage earners amounting to $500 per worker.
Had McCain’s tax proposal been in place in 2006, both families would have done incredibly well–saving even more than they did under the existing Bush plan. John and Cindy McCain would have walked away with $373,429 in their pocket, while the Barack and Michelle Obama would have saved $49,392.
Under Obama’s plan, both families would have saved, but substantially less. The McCains would have enjoyed an estimated savings of $5,641, due to the lower tax rates; the Obamas registering a $6,124 savings.
A Forecast For The Future
This examination of the tax returns of these two prominent wealthy couples, the McCains and the Obamas, shows that both received substantial tax breaks under president Bush — and those tax breaks will be continued in a McCain Administration. The McCains’ returns particularly show how tax breaks on capital gains and dividends, hallmarks of McCain’s plan, benefit the wealthy far more than they possibly can for middle-income families. Such tax breaks, of course, have a cost in lost public investments for the present and the future — investments which could benefit everyone, rich, poor, or in the middle.
Read the full report here.