FACTBOX-McCain, Obama on taxes and fiscal spending
Aug 14 (Reuters) - As the U.S. economy continues to slide ahead of the Nov. 4 election, presidential rivals John McCain and Barack Obama have proposed a bounty of tax breaks and spending projects to stimulate jobs and investment.
Many are aimed at helping families cope with mortgages and rising food and fuel costs, but they also aim to foster development of renewable energy sources, clean technologies and infrastructure.
Below is an outline of plans from Republican candidate McCain and Democratic candidate Obama. Both would increase the national debt by trillions of dollars over a two-term presidency.
BUSH 2001-2003 TAX CUTS
McCain: Make permanent all provisions of these cuts, which are due to expire at the end of 2010, other than the repeal of the estate tax. Make the estate tax permanent with the first $5 million exempted and a 15 percent rate on inheritance amounts above that level.
Obama: Make permanent select provisions, including expanded child tax credits and the 10-, 15-, 25- and 28-percent tax rate brackets. He would allow the top two rates of 36 and 39.6 percent to return to their levels before the Bush tax cuts. He proposes to make the estate tax permanent with a $3.5 million exemption and a 45 percent rate.
NEW TAX CUTS
McCain: Double the personal tax exemption for dependents to $7,000. Reduce the maximum corporate tax rate in phases to 25 percent from 35 percent and allow businesses a first-year deduction for purchases of equipment. Convert research and development expenses tax credit to a credit for 10 percent of wages incurred for R&D and make this provision permanent. McCain also proposed a summer 2008 suspension of federal taxes on gasoline and diesel fuel.
Obama: Create refundable "Making Work Pay Credit" for low-income workers of 6.2 percent of earnings up to a maximum of $8,100. Expand the Earned Income Tax Credit and Child and Dependent Care Tax Credit. Create refundable "Universal Mortgage Credit" of 10 percent of mortgage interest for home owners who do not itemize tax returns. Eliminate income tax for seniors making less than $50,000 per year. Mandate automatic 401(k) and individual retirement account contributions, expand tax credits for low-income savings and college education funds. Make permanent the R&D and renewable energy production tax credits.
CAPITAL GAINS TAXES, AMT
McCain: Keep current tax rates on dividends and capital gains. Permanently extend the 2007 alternative minimum tax exemption, increase it by 5 percent per year after 2013.
Obama: Increase the maximum capital gains rate to 25 percent. Require reporting of cost basis for calculating gains. Eliminate capital gains taxes on start-up businesses and provide tax breaks for landowners selling to first-time family farmers. Extend and index the 2007 AMT patch.
HEALTH CARE
McCain: Include employer-paid health insurance as taxable income and replace the previous exclusion with a refundable tax credit of $2,500 per year for individuals and $5,000 for families. This aims to encourage people to buy more efficient health insurance plans and control health care costs. Create a high-risk pool to help people with high health costs get insurance.
Obama: Target tax subsidies to low income people to help them buy health insurance, expand Medicaid to cover all adults up to the poverty line and the State Children's Health Insurance Program to cover all children in families with income up to three times the poverty level. Impose a "pay or play" plan that would charge employers a 6 percent payroll tax penalty if they don't provide health insurance for employees.
TAX SIMPLIFICATION:
McCain: Create optional alternative tax with two rates and larger standard deductions and personal exemptions.
Obama: Provide taxpayers the option of a "pre-filled" tax form that they simply verify and sign.
REVENUE RAISING MEASURES
McCain: Eliminate oil and gas tax loopholes. Broaden the corporate tax base by eliminating unspecified preferences. Repeal the domestic production activities tax deduction for businesses. Eliminate earmarked projects from the budget.
Obama: Eliminate oil and gas tax loopholes. Close loopholes that allow companies to deduct chief executive pay. Tax publicly traded financial partnerships as corporations. Tax carried interest as ordinary income. Reallocate multinational tax deductions. Raise payroll taxes for those earning above $250,000.
OVERALL EFFECT OF TAX, HEALTH CARE PLANS
McCain: According to the Tax Policy Center, a joint venture of Washington-based think tanks The Urban Institute and the Brookings Institution, McCain's tax and health care plans would reduce federal tax revenues by $4.2 trillion over the 2009-18 period compared with current law, under which the 2001 and 2003 tax cuts expire at the end of 2010 and the AMT remains in full force. Compared to a "baseline" scenario that assumes extension of the Bush tax cuts and extension of an indexed AMT "patch," McCain's plan would reduce revenues by $600 billion for the 10-year period. Including interest, the McCain plan would increase the national debt by $5 trillion by 2018.
Obama: Plans would cut tax revenues by $2.8 trillion over the 2009-18 period compared with current law, according to the Tax Policy Center. Compared to the baseline scenario, Obama's plan would increase revenues by $800 billion. Including interest costs, his plan would increase the national debt by $3.4 trillion by 2018.
The Tax Policy Center cost estimates do not include the following spending plans for economic stimulus, or energy/infrastructure development:
ECONOMIC STIMULUS SPENDING
McCain: Spend up to $10 billion to allow some homeowners to trade high-interest, adjustable-rate mortgages for safer, fixed-rate loans. Summer 2008 suspension of 18.4 cents-a-gallon gasoline tax and 24.4 cents-a-gallon diesel tax.
Obama: Provide immediate tax rebate of up to $1,000 for low- and middle-income couples to help them cope with high energy costs, paid for by additional windfall profits taxes on energy producers. Second, $50 billion economic stimulus plan, including $25 billion in infrastructure improvements and $25 billion to aid state and local governments to help them avoid spending and services cuts and deal with home foreclosures.
ENERGY, INFRASTRUCTURE SPENDING:
McCain: Build 45 nuclear reactors by 2030 and commit $2 billion annually until 2024 to clean-coal research and development. Proposes "serious investment" to upgrade electric power transmission system, including capacity to charge electric cars if mass-produced in the next decade. Award $300 million prize for development of a battery package that would make electric cars viable on a large scale, create $5,000 tax credit for customers who buy zero-carbon emission vehicles.
Obama: Invest $150 billion over 10 years to advance biofuels, renewable energy and clean coal plants. Create $1 billion annual investment program to help manufacturers modernize infrastructure, adopt clean technologies. Provide $4 billion in tax credits to help automakers retool plants and invest in advanced propulsion and lightweight materials. Create $60 billion National Infrastructure Reinvestment Bank over 10 years to rebuild roads, bridges, ports and railways. Proposes to improve mass transit, develop high-speed rail corridors and modernize air traffic control system. (Reporting by David Lawder. editing by Vicki Allen)
Many are aimed at helping families cope with mortgages and rising food and fuel costs, but they also aim to foster development of renewable energy sources, clean technologies and infrastructure.
Below is an outline of plans from Republican candidate McCain and Democratic candidate Obama. Both would increase the national debt by trillions of dollars over a two-term presidency.
BUSH 2001-2003 TAX CUTS
McCain: Make permanent all provisions of these cuts, which are due to expire at the end of 2010, other than the repeal of the estate tax. Make the estate tax permanent with the first $5 million exempted and a 15 percent rate on inheritance amounts above that level.
Obama: Make permanent select provisions, including expanded child tax credits and the 10-, 15-, 25- and 28-percent tax rate brackets. He would allow the top two rates of 36 and 39.6 percent to return to their levels before the Bush tax cuts. He proposes to make the estate tax permanent with a $3.5 million exemption and a 45 percent rate.
NEW TAX CUTS
McCain: Double the personal tax exemption for dependents to $7,000. Reduce the maximum corporate tax rate in phases to 25 percent from 35 percent and allow businesses a first-year deduction for purchases of equipment. Convert research and development expenses tax credit to a credit for 10 percent of wages incurred for R&D and make this provision permanent. McCain also proposed a summer 2008 suspension of federal taxes on gasoline and diesel fuel.
Obama: Create refundable "Making Work Pay Credit" for low-income workers of 6.2 percent of earnings up to a maximum of $8,100. Expand the Earned Income Tax Credit and Child and Dependent Care Tax Credit. Create refundable "Universal Mortgage Credit" of 10 percent of mortgage interest for home owners who do not itemize tax returns. Eliminate income tax for seniors making less than $50,000 per year. Mandate automatic 401(k) and individual retirement account contributions, expand tax credits for low-income savings and college education funds. Make permanent the R&D and renewable energy production tax credits.
CAPITAL GAINS TAXES, AMT
McCain: Keep current tax rates on dividends and capital gains. Permanently extend the 2007 alternative minimum tax exemption, increase it by 5 percent per year after 2013.
Obama: Increase the maximum capital gains rate to 25 percent. Require reporting of cost basis for calculating gains. Eliminate capital gains taxes on start-up businesses and provide tax breaks for landowners selling to first-time family farmers. Extend and index the 2007 AMT patch.
HEALTH CARE
McCain: Include employer-paid health insurance as taxable income and replace the previous exclusion with a refundable tax credit of $2,500 per year for individuals and $5,000 for families. This aims to encourage people to buy more efficient health insurance plans and control health care costs. Create a high-risk pool to help people with high health costs get insurance.
Obama: Target tax subsidies to low income people to help them buy health insurance, expand Medicaid to cover all adults up to the poverty line and the State Children's Health Insurance Program to cover all children in families with income up to three times the poverty level. Impose a "pay or play" plan that would charge employers a 6 percent payroll tax penalty if they don't provide health insurance for employees.
TAX SIMPLIFICATION:
McCain: Create optional alternative tax with two rates and larger standard deductions and personal exemptions.
Obama: Provide taxpayers the option of a "pre-filled" tax form that they simply verify and sign.
REVENUE RAISING MEASURES
McCain: Eliminate oil and gas tax loopholes. Broaden the corporate tax base by eliminating unspecified preferences. Repeal the domestic production activities tax deduction for businesses. Eliminate earmarked projects from the budget.
Obama: Eliminate oil and gas tax loopholes. Close loopholes that allow companies to deduct chief executive pay. Tax publicly traded financial partnerships as corporations. Tax carried interest as ordinary income. Reallocate multinational tax deductions. Raise payroll taxes for those earning above $250,000.
OVERALL EFFECT OF TAX, HEALTH CARE PLANS
McCain: According to the Tax Policy Center, a joint venture of Washington-based think tanks The Urban Institute and the Brookings Institution, McCain's tax and health care plans would reduce federal tax revenues by $4.2 trillion over the 2009-18 period compared with current law, under which the 2001 and 2003 tax cuts expire at the end of 2010 and the AMT remains in full force. Compared to a "baseline" scenario that assumes extension of the Bush tax cuts and extension of an indexed AMT "patch," McCain's plan would reduce revenues by $600 billion for the 10-year period. Including interest, the McCain plan would increase the national debt by $5 trillion by 2018.
Obama: Plans would cut tax revenues by $2.8 trillion over the 2009-18 period compared with current law, according to the Tax Policy Center. Compared to the baseline scenario, Obama's plan would increase revenues by $800 billion. Including interest costs, his plan would increase the national debt by $3.4 trillion by 2018.
The Tax Policy Center cost estimates do not include the following spending plans for economic stimulus, or energy/infrastructure development:
ECONOMIC STIMULUS SPENDING
McCain: Spend up to $10 billion to allow some homeowners to trade high-interest, adjustable-rate mortgages for safer, fixed-rate loans. Summer 2008 suspension of 18.4 cents-a-gallon gasoline tax and 24.4 cents-a-gallon diesel tax.
Obama: Provide immediate tax rebate of up to $1,000 for low- and middle-income couples to help them cope with high energy costs, paid for by additional windfall profits taxes on energy producers. Second, $50 billion economic stimulus plan, including $25 billion in infrastructure improvements and $25 billion to aid state and local governments to help them avoid spending and services cuts and deal with home foreclosures.
ENERGY, INFRASTRUCTURE SPENDING:
McCain: Build 45 nuclear reactors by 2030 and commit $2 billion annually until 2024 to clean-coal research and development. Proposes "serious investment" to upgrade electric power transmission system, including capacity to charge electric cars if mass-produced in the next decade. Award $300 million prize for development of a battery package that would make electric cars viable on a large scale, create $5,000 tax credit for customers who buy zero-carbon emission vehicles.
Obama: Invest $150 billion over 10 years to advance biofuels, renewable energy and clean coal plants. Create $1 billion annual investment program to help manufacturers modernize infrastructure, adopt clean technologies. Provide $4 billion in tax credits to help automakers retool plants and invest in advanced propulsion and lightweight materials. Create $60 billion National Infrastructure Reinvestment Bank over 10 years to rebuild roads, bridges, ports and railways. Proposes to improve mass transit, develop high-speed rail corridors and modernize air traffic control system. (Reporting by David Lawder. editing by Vicki Allen)
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