1. Mortgage Crisis

Obama

The ongoing mortgage crisis is a problem that is affecting more and more American families every day. To help protect home ownership and fight mortgage fraud, Obama has presented a multi-tiered plan designed to help families facing foreclosure and also monitor the mortgage industry better to avoid future problems.

Obama supports the Stop Fraud Act that provides a definition of mortgage fraud and rules and regulations to help stop the problem. The act also requires the Government Accountability Office to evaluate lending practices and report their findings to congress.

The final component of Obama’s mortgage relief plan is to create a universal mortgage credit. Currently, the United States tax code only encourages families to purchase a home with a tax deduction. However, it is currently only available to taxpayers that itemize their returns. This leaves out about 2/3 of Americans who elect to take the standard deduction. Obama would like to create a universal mortgage credit that he claims will benefit an additional 10 million homeowners.

McCain

Senator McCain also has is own take on the mortgage crisis. His plan is called the new “Home Plan,” which aims to provide help to those hurt by the housing crisis. McCain claims that his plan will allow every deserving homeowner the opportunity to trade in a burdensome mortgage for a more manageable one that will reflect his or her home’s current value.

However, exactly “who” is deserving? According to McCain’s website, eligible individuals include those Americans that hold a non-conventional mortgage taken after 2005. The house will need to serve as the home owner’s primary place of residence and he or she will need to be able prove they cannot meet current payments, but would be able to comply with a new 30 year fixed rate mortgage.

The Difference

Although Obama’s plan seems more substantive than McCain’s, they both attempt to help solve the countries mortgage problem. However, as with many other issues Obama’s seems to target lower income families namely those that do not itemize which typically correlates to families that make under $50,000. I think it is also interesting to note that they both propose the creation of a government agency to monitor the mortgage industry, but they propose them for different branches of the government.

2. Lower Income Americans

Obama

Sen. Obama’s tax plan seems in line with his redistribution of wealth ideals. His economic plans surround the idea of giving every lower-income American an opportunity to better themselves. The centerpiece is his “Make Work Pay” tax credit that would encourage Americans to take control of their lives, while providing tax relief to both low and middle income taxes. The credit would offset federal taxes on the first $8,100 of a taxpayers earnings and would essentially generate a credit of up to $500 for single persons or $1,000 per family. According to Obama, this credit would eliminate income taxes for at least 10 million low-income Americans.

Another of Obama’s more popular tax views is to help make higher education more affordable. He would do this through creating a credit to reimburse taxpayers for the costs of obtaining a college education. According to his plan, the credit would reimburse taxpayers on the first $4,000 they spend on a college education. Obama’s campaign claims that it will cover two-thirds of the cost of attending a public college or university.

McCain

As with most Republicans, McCain’s tax plan is more geared to middle and upper income Americans. However, one major component of his campaign has been “Immediate Help for American Families.” In this plan, he claims to target policies that will provide relief to American taxpayers facing rising gas and food prices and record foreclosures. However, it is unclear how McCain’s actual proposals will do that. Specifically, McCain target opaque issues like corn and sugar subsidies, trade barriers, and the Strategic Petroleum Reserve (SPR). While we all know that nothing happens over night, it is even more unclear how these changes in these policies will immediately help the American taxpayer as McCain claims.

One of the tax cuts McCain supports is raising the personal exemption for dependents from $3,500 to $7,000. This would help any working taxpayer with dependents they have to provide for, regardless of income level.

The Difference

Obama’s tax plan is much more favorable to lower income Americans than McCain’s. He supports programs like the “Make Work Pay” credit that will not only help lower income Americans, but also encourage them to work. It is also interesting to note that both candidates support tax credits designed to help families or anyone taking care of dependents.

3. Higher Income Americans

Obama

Senator Obama is a big believer in our progressive tax system – and he is not afraid to hide that. So one of the first things Obama is set to do is letting President Bush’s 2001 and 2003 tax cuts to selectively expire. By “selectively expire”, Obama endorses extending those tax cuts on the rates for all but the top two income tax brackets. In addition, Obama also advocates increasing the income cap on payroll taxes. This would essentially be a huge tax increase for taxpayers earning between $97,000 and $250,000, which goes against Obama’s prior commitment to not raise taxes on individuals making less than $250,000.

Although Obama voted “nay” on repealing the Alternative Minimum Tax (AMT), he does support a revamp of the tax. The specific details of his plan are a bit hazy, but Obama has claimed he would like to index the tax according to inflation so that it does not affect middle-income Americans.

McCain

McCain is a strong supporter of lowering taxes to encourage economic growth, which is the dominant economic stance of the Republican Party. Not only does he support renewing the Bush tax cuts, but he also favors numerous tax cuts. McCain hopes to reduce taxes on Capital Gains, Interest, Dividend, Investment income, and even corporate tax rates.

McCain is a strong supporter of repealing the Alternative Minimum Tax (AMT), which would be a tax cut for the upper middle income taxpayers. However, if McCain wants this tax fully repealed, then he is going to have to strike a deal with Congress, and it seems highly unlikely that he would get enough support to make this drastic and costly change.

Although McCain had originally voted against the Bush tax cuts, he now claims to support an extension of the plan. “I voted to extend them because it would have the effect of having a tax increase,” claimed McCain when asked about his flip-flop. “The tax cuts have increased revenues enormously. They’ve been very beneficial. The problem is that spending has lurched completely out of control. My proposal was to restrain spending. I do not support tax increases. And the effect of not making them permanent would have the effect of a tax increase.”

The Difference

It is no surprise that McCain’s tax views favor the upper income Americans, as he supports the full extension of President Bush’s tax cut. On the other hand, he does support the repeal of the AMT, which is being levied on more of middle income Americans each year. Although Obama does support other tax breaks for the middle class, he does not want to repeal the AMT.

4. Capital Gains

Obama

One of the more controversial aspects of Obama’s tax proposal is his hope to nearly double the taxes levied on Capital Gains. The current tax rate on Capital Gains is 15%, and Obama hopes to raise it to 28%. “At a time when Americans are working harder than ever, we are taxing income from work at nearly twice the level that we’re taxing gains for investors,” Obama claims. “We’ve lost the balance between work and wealth.”

When questioned about his plan’s to nearly double the rate, Obama claims that he wants to raise the tax for fairness, not for revenue. One of his arguments is that the top 50 hedge fund managers made $29 billion last year, but paid lower tax rates then their secretaries did. Obama wants to restore the rate back to what it was in the Clinton era. Although the rate is much lower today than it was a decade ago, it is being levied on a lot more people. Investing is not only for the rich any more – millions of middle income America invests in stocks, retirement accounts, and mutual funds.

Additionally, Obama also fails to mention that the 28% Capital Gains rate was dropped to 20% during President Clinton’s time in office and studies show that the federal government’s revenue from Capital Gains actually increased. Then, when President Bush dropped the rate down to 15% the revenue increased yet again.

McCain

McCain plans to keep the current Capital Gains tax rates. He claims that since these taxes are voluntary, they should not be taxes as ordinary income. In order to make a profit, someone must sell a stock. Further taxes could distort decision-making, increase the use of tax shelters, and even lower the federal government’s revenue. Additionally, McCain claims that this tax policy actually helps lower income Americans, as half of all capital gains end up benefiting persons earning less than $50,000 a year.

The Difference

The differences between McCain’s and Obama’s views on Capital Gains are quite simple. Obama favors doubling the tax rate and McCain wants to keep it at current levels. Although it may seem unfair for Capital Gains to be taxed at lower rates than income, there is some evidence that supports the belief that it encourages economic growth. The federal government’s revenue from Capital Gains has increased since the rate was lowered. You cannot argue against facts. Finally, raising a tax for fairness and not for revenue is not a sound economic policy.