Saturday, June 21, 2008

Economic Policies of Obama and McCain

It has been argued that American politics has become increasingly blurred on economics between left and right. Under Clinton, the Democrats lost the mantle of being a tax and spend party. Perhaps unexpectedly, they gained a reputation for being a party of fiscal responsibility, managing to achieve a budget surplus - a rare event in modern American history. However, looking at the campaign promises of Obama and McCain a clear choice is emerging.

Obama Tax Plans

Mr Obama has suggested:
  • Raising the top income-tax rate from 35% to 39.6% (This is the level before Bush's tax cuts)
  • Remove earnings cap on payroll tax. This could lead to a top marginal tax rate rate of 46%
  • He also suggests increase capital gains from 15% to 25%
Some of the details are sketchy, but, he has left no doubt about his willingness to increase tax on the well off; a reversal of the strategy under Bush.

McCain Tax Policies

McCain by contrast has focused on promising more tax cuts, such as cutting corporation tax to 10% and keep income tax for the rich high. He promises to pay for these tax cuts through 'spending cuts' But, like many republicans before him, talking about 'spending cuts' is much easier than actually being able to implement them. If the tax cuts were implemented, it is likely the budget deficit (already had dangerous levels) would continue to grow.

But, these policies do present voters with a clear choice. If you own a business and receive a high income McCain will make you better off, Obama will make you worse off. If you on a low / middle income you will be more favoured by an Obama presidency.

It will be interesting to see whether many Americans agree with Warren Buffet's assessment that high income earners deserve to pay more tax.

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