There was a lot of talk about tax policy in the third debate, but much of it vague. Curious what the tax policies are? Well here is an apparently respectable summary by the Brookings Institute.
The takeaway point:
The two candidates’ tax plans would have sharply different distributional effects. Senator McCain’s tax cuts would primarily benefit those with very high incomes, almost all of whom would receive large tax cuts that would, on average, raise their after-tax incomes by more than twice the average for all households. Many fewer households at the bottom of the income distribution would get tax cuts and those tax cuts would be small as a share of after-tax income. In marked contrast, Senator Obama offers much larger tax breaks to low- and middle-income taxpayers and would increase taxes on high-income taxpayers. The largest tax cuts, as a share of income, would go to those at the bottom of the income distribution, while taxpayers with the highest income would see their taxes rise significantly.
It’s a hard sell for Republicans. Because the Republican goal for the income tax is a flat tax (a single percentage of income regardless of income) and the current income tax is progressive (higher rates for higher income levels), Republican proposals are inevitably exposed to the charge that they primarily benefit the wealthy.
And how does the Republican party recover from Obama’s proposed entrenching of the progressive system of taxation? Does the next Republican administration simply reverse the tax hike for those affected? Imagine the outroar if a tax cut were to benefit only the wealthiest 5% of Americans. The desire to avoid this is probably why McCain has tacked on meager tax cuts for middle and lower class Americans as well. The most straightforward way, of course, to flatten the tax rate would be to drastically lower the rate for the wealth while increasing the tax rate for the middle/lower class. Where does that lie on the impossibility spectrum?
A fair tax policy is a hard sell, and Obama’s inevitable victory will make it harder. Yet another reason for me to be depressed by the Obama victory.