Thompson At Republican Convention Misrepresents Obama and McCain Tax Plans

Fred Thompson in his speech last night at the Republican Convention praised John McCain’s tax plan, ridiculed Barack Obama’s tax plan, and misrepresented both. Thompson said, “We need a President who understands that you don’t make citizens prosperous by making Washington richer, and you don’t lift an economic downturn by imposing one of the largest tax increases in American history.”

Thompson said, “Now our opponents tell you not to worry about their tax increases. They tell you they are not going to tax your family. No, they’re just going to tax ‘businesses’! So unless you buy something from a ‘business’, like groceries or clothes or gasoline … or unless you get a paycheck from a big or a small ‘business’, don’t worry … it’s not going to affect you. They say they are not going to take any water out of your side of the bucket, just the ”other” side of the bucket! That’s their idea of tax reform.”

What is interesting is that both McCain and Obama have made detailed proposals concerning federal tax policy and that these proposals have been analyzed by a non-partisan group called the The Tax Policy Center — a joint venture of The Urban Institute and The Brookings Institution.

According to this non-partisan analysis, under the plan of Barack Obama, the rich would pay more while the poor and middle-class would pay less. Under John McCain’s plan, the rich would pay much less than they do now, the poor and middle-class would pay a bit less. The federal deficit would grow under both plans, but moreso under McCain’s plan. Obama’s tax plan would boost the debt by $3.5 trillion by 2018. McCain’s plan would increase the debt by $5 trillion. An article in The Chicago Sun Times compared the two plans:

• Obama says he would hike several taxes on people making more than $250,000, including the amount they pay on capital gains. Currently, the top income tax rate is 35 percent. Under Obama, that would go back up to 39 percent. Obama’s staff told the Urban-Brookings Tax Policy Center he would raise the rates for people in the top two brackets — about 2.5 million filers out of 100 million-plus. People in those high tax brackets would see the tax rate on their capital gains hiked from the current 15 percent to 20-28 percent
• Obama started his campaign saying his plans would not increase taxes for people earning less than $250,000. But he found himself in an apparent contradiction by saying he would tax all income to fund Social Security, not just income up to $102,000, as is now the case. So now, Obama’s plan calls for no Social Security tax on income between $102,000 and $250,000, but all income above $250,000 would be taxed for Social Security.
• The 95 percent-plus of the American population that earns less than $250,000 would see the following tax breaks: A $500-per-worker tax credit for people who earn less than $150,000 and do not itemize, and a $4,000 credit per child in college. Seniors who earn less than $50,000 would pay no income tax. The Tax Policy Center notes seniors could end up paying more if corporations respond to Obama’s proposed increase in the corporate tax rate by passing those costs along to consumers.
• McCain would make permanent most of the tax cuts President Bush has already enacted, including those that benefit the middle class, such as elimination of the marriage penalty and the increase in child credits. He would also keep cuts that benefit the wealthy, such as the elimination of the highest tax brackets. Obama would keep the breaks for the middle class but not the ones for the wealthy.
• McCain would also double the dependent exemption from $3,500 to $7,000, benefitting big families of all incomes.
• Obama would leave the top corporate tax rate at 35 percent. McCain would cut it to 25 percent.
  The two candidates differ widely in their approach to the estate tax, which the Republicans call the “death tax.” McCain would set it at 15 percent for estates above $5 million. Obama would set it at 45 percent for estates above $3.5 million.
• Both candidates favor extending a “patch” that would keep the Alternative Minimum Tax from encroaching on middle-income families.
• Obama’s plan would bring in an additional $700 billion in taxes over the next 10 years, while McCain’s would cost the Treasury $600 billion. Assuming legislators would have let the tax breaks expire, Obama’s plan would cost the U.S. Treasury $2.7 trillion and McCain’s $3.7 trillion.