Nation/World

Rivals’ tax plans both would raise debt, report says

WASHINGTON – The competing tax plans laid out by Barack Obama and John McCain would add trillions of dollars to the national debt and could add to the tax system’s complexity, a nonpartisan tax research group concluded in a report released Wednesday.

Both campaigns have insisted that their plans to continue many Bush-era tax cuts and offer new reductions would aid the economy without requiring massive new spending. But the Washington-based Tax Policy Center warned that under either candidate, “the debt would likely continue to rise as it has over the past eight years.”

Obama’s plan – a combination of cuts targeted to middle- and low-income Americans and increases for the wealthy – would increase the national debt by an estimated $3.4 trillion over the next decade, the center reported. Under a similar analysis, McCain’s tax proposals – largely a continuation of the Bush tax reductions – would add $5 trillion. The current national debt stands at $9.5 trillion.

Both candidates would maintain the Bush tax cuts for the working poor and middle-income taxpayers. But they differ drastically on how to target the richest Americans.

The report estimated that under McCain’s plan, middle-income Americans who make between $38,000 and $66,000 a year would see average tax cuts of up to $1,400 annually in 2012. But McCain would aid the wealthiest 1 percent – those who make more than $603,000 per year – with annual tax reductions averaging $127,000.

Under Obama’s plan, the tax center reported, middle-income taxpayers would have tax cuts averaging $2,100 in 2012. But the affluent top 1 percent of taxpayers would see increases on average of $38,000 a year.

Leonard E. Burman, a Tax Policy Center senior fellow who was among a team of analysts who reviewed the candidates’ plans, said in an interview that important portions of Obama’s and McCain’s plans have yet to be fleshed out.

Burman also said that while the candidates’ plans attempt to streamline the tax system, they create potential new complexities for taxpayers.

Obama and McCain would continue the alternative minimum tax, long criticized for adding to the tax bite and complexity for middle-class and many upper-middle-class taxpayers.

McCain would allow taxpayers to circumvent the AMT with an “optional alternative tax system” that could cause new chaos.

“If the new alternative tax system does not offer significant tax cuts, having to figure taxes under two systems and estimate which one would be better would add complexity, not reduce it,” the center cautions.

And although Obama seeks to aid low-income taxpayers with a proposal in which the government would prepare their tax returns, and they would approve them, he has committed only vaguely to “fiscally responsible” AMT reform, the center notes.

Another concern, Burman noted, is that Obama and McCain have presented “somewhat differing” versions of their plans on the campaign trail than what they have issued on the Web and in position papers.



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