First, "and let me make this clear," no candidate's tax plan is set in stone. For any plan to take effect it must ultimately be approved by Congress (and of course, then be signed by the president). Second, any politician that says he will not raise taxes is probably lying, pure and simple. Almost every single elected president in the past who has made this promise and please, "read my lips," has gone ahead and raised taxes anyhow.
So far, our candidate's promises include tax credits and tax cuts, and in McCain’s case, new taxes (on health care benefits). Everyone from financial tax analysts to amateur bloggers stumping for a particular candidate are offering projections on how the two very different proposed plans would affect individuals and businesses.
There are at least three credible online resources now available to plug in numbers and compare your candidate’s plan with his opponent's.
WIB does not directly or indirectly imply endorsement of, nor necessarily share or support the opinions of, any of the following resources or their parties, candidates, affiliates … yadda yadda yadda and all that other legal disclaimer stuff:
Obamataxcut.com: This free online tax calculator is a project of AlchemyToday and not related to any political campaign, party, or organization. The calculator is a user-friendly tool that compares how McCain and Obama's plans could affect your pocket book.
The calculator returns your estimated change in 2009 tax by adding together the changes in income and corporate tax calculated by the independent, non-partisan Tax Policy Center data based upon your income, filing status, and number of dependents. The site's owner is an Obama supporter, but isn't affiliated with the Obama campaign and provides links to Tax Policy Center documents for all results.
Obama-Biden Tax Cut Calculator: A website sponsored by Barack Obama. The calculator returns results with a nice little plug for Obama. The bad thing about this calculator is that if your income is too high and you will not receive a cut, Obama does not tell you how much of an increase you can expect. Sensitive Ear Advisory: Annoying background music plays constantly!
Ted Frank SpreadSheet: This interactive spreadsheet was prepared by Ted Frank of the American Enterprise Institute. Ted’s spreadsheet offers sample data of an imaginary trader making $280,000 (but you can substitute his data with your own numbers and see how things might look for you). Using Ted’s spreadsheet, the trader would fare better on taxes with McCain’s tax plan. (Obama’s calculator also show’s Ted’s Trader doing better under McCain.)
For fun, I ran numbers for an imaginary single mother with four children an an adjusted gross income (AGI) of $150,000. Here is what I got (- means reduction in taxes over current rates and + indicates in increase in taxes):
Site #1 – Obamataxcut.com (Alchemy Today Project): Under Obama's Plan: -$3,095.76; Under McCain's: -$3,744.82
Site #2 – The Obama-Biden Tax Calculator: Under Obama's Plan: -$1,300; Under McCain's Plan: -$300
Site #3 – Ted Frank’s Spreadsheet: Under Obama’s Plan: 31% tax bracket; Under McCain’s: 28% tax bracket. Not much significance there.
I ran a second set of numbers for a married couple, with two wager earners, one child, and an adjusted gross income of $500,000 (the Alchemy Today calculator jumps from $200,000 to $500,000 so I could not use numbers in between):
Site #1 – Obamataxcut.com (Alchemy Today Project): Under Obama's Plan: +$ $10,279.69; Under McCain's: -$4,205.22. BIG difference here.
Site #2 – The Obama-Biden Tax Calculator: Under Obama's Plan: “You probably will not get a tax cut under the Obama Plan” was returned. But no indication of how much my income tax would be raised.
Site #3 – Ted Frank’s Spreadsheet: Under Obama’s Plan: 31% Tax Bracket; Under McCain’s: 28% tax bracket. Not much significance there.
ElectionTaxes.com also has an interactive website to compare taxes by candidate's plans. This calculator allows you to input detailed information about income and specific deductions and then compares how you would fair under McCain’s and Obama’s plans for 2009 through 2012.
Using the ElectionTaxes.com calculator on my first scenario (single mom, four kids, $150k AGI), I did better under Obama; and for the second scenario of a married couple filing jointly with one child and an AGI of $500k McCain’s plan, on average, saved me about $13k annually in taxes over Obama’s plan.
So what does all this mean? Here is a summary of my scenarios:
If you have an AGI of less than $200,000 and are single (with or without children), you will pay less taxes under Obama (although Obama’s plan always beats McCain’s, the McCain plan does better against itself if you are married with children than if you are single with children);
If your AGI is less than $250,000 and you are married with children, you will pay less tax under McCain (again, McCain gives higher initial deductions to married couples with children than to single parents with children) if you can take his $7,000 per child deduction; and
With an AGI of $500k for a married couple with children you will likely see a tax decrease under McCain (again, this assumes you can take the full McCain child deduction -- if you are single parent you cannot) and a 3% increase in tax bracket for Obama over McCain’s plan.
For those who would pay the extra 3% under an Obama administration, the next question you should ask is just what are those extra taxes paying for? And that “my friends” is just as difficult a question to answer as “how much tax will I really pay under McCain and Obama?”
