The Tax Policy Center just put out a very good report (pdf) comparing McCain's and Obama's tax plans. The basics: how much, or (in Obama's case) whether, each candidate's tax plans would add to the deficit depends on what you take your baseline to be, and in particular, on whether you assume (a) that Bush's tax cuts
expire on schedule are made permanent (oops!), and (b) that the Alternative Minimum Tax gets a permanent fix. (Both are very, very expensive.) Personally, I prefer assuming (b) but not (a): there's bipartisan consensus behind fixing the AMT, and it's overwhelmingly likely that that will happen eventually; but there is no such consensus behind making Bush's tax cuts permanent.
However, the Center doesn't score the candidates' plans as I would like, proving once again that my whims do not govern the universe. If you assume neither (a) nor (b), then the candidates' "specific non-health tax proposals would reduce tax revenues by $3.7 trillion (McCain) and $2.7 trillion (Obama) over the next 10 years. (...) Furthermore, as in the case of President Bush's tax cuts, the true cost of McCain's policies may be masked by phase-ins and sunsets (scheduled expiration dates) that reduce the estimated revenue costs. If his policies were fully phased in and permanent, the ten-year cost would rise to $4.1 trillion, or about 11 percent of total revenues."
If, on the other hand, you assume both (a) and (b), then "Senator Obama's proposals would raise $700 billion, an increase of 2 percent, and Senator McCain's proposals lose $600 billion, a decrease of roughly 2 percent."
However you score it, McCain's is more expensive by at least a trillion dollars over ten years.
Who gets what from these changes to the tax code? Here's a graphic, which Kevin Drum got from the report, and I stole from him:
The cutoffs for these quintiles (in 2008 dollars) are as follows: "20% $19,740, 40% $38,980, 60% $69,490, 80% $117,535, 90% $169,480, 95% $237,040, 99% $619,561, 99.9% $2,832,449." (p. 24.) It's worth noting that if you check the table on p. 24, which has more detail than this graph, you can see that people below the top five percent (which starts at $237,040) do not lose after-tax income under Obama's plan, and people making $237,040-$619,561 lose all of $12 a year, on average. It's only in the top one percent that people take a sizable hit. But since so much of the Bush tax cuts went to them, that seems fair to me.
One more interesting note: the Wonk Room points out that this report attributes to McCain some positions that are at odds with his web site and what he's said in the past -- as recently as the day before yesterday, in fact. Most notably, McCain's website says that "John McCain will permanently repeal the Alternative Minimum Tax (AMT) – a tax that will be paid nearly exclusively by 25 million middle class families." The TPC report, by contrast, says: "Senator McCain proposes to extend permanently the AMT "patch" that has prevented most individuals and families with incomes below $200,000 from being affected by the tax."
This is a big difference. The AMT is a tax that was designed to ensure that the rich do not avoid paying taxes. It excludes a lot of loopholes and the like. The problem with it is that since the level at which it kicks in is not indexed for inflation, more and more people are covered by it every year -- or they would be if Congress didn't pass "patches", which basically exempt people below a certain level from paying it. (Why not do this permanently? Because it would blow a huge hole in the budget that no one can figure out how to deal with, and passing a one-year patch minimizes what Congress has to find in order to comply with PAYGO rules.)
In any case: "patching" the AMT means: moving the level at which it kicks in back to the level it was meant to be at, so that only the wealthy pay it. (Preferably, the patch would not just be made permanent, but also indexed for inflation, so that this problem doesn't come along again in a few years.) Repealing the AMT, by contrast, means, well, repealing it, so that no one pays it at all. The difference between the two concerns whether the wealthy pay the AMT or not. And repealing the AMT is a lot more expensive than extending the patch.
The Tax Policy Center consulted with both campaigns before writing this report. If what they say is accurate, then McCain has changed an important part of his tax policy, but neither his website nor (apparently) McCain himself as of two days ago have caught up with this fact. On the other hand, if the TPC is wrong, and McCain does plan to repeal the AMT, then the TPC's estimates of the cost of his tax plans need to be revised as well.
According to the CBPP, the difference between amending the AMT to exclude people with incomes under $200,000 a year and repealing it altogether is over $50 billion dollars a year. Since the CTP estimates the cost of the candidates' tax plans over a ten year period, if they're wrong about what McCain thinks, we'll just have to tack another half a trillion dollars onto their estimate of his plan's cost.
Confusion and reckless profligacy, or no confusion and even more reckless profligacy? We report; you decide.