The impeccable Urban Institute has undertaken a detailed analysis of the tax policy proposals puts forth by the two candidates. The bottom line is clear: McCain’s tax cuts would primarily benefit those with very high incomes, raising their after-tax income by more than twice the average of all households. In contrast, Obama’s tax cuts are geared to the lower and middle-income groups, and taxes increase on the richest. In sum, Obama’s plan is progressive in the sense that it lowers taxes at the bottom and raises at the top, while McCain’s is regressive, even compared with a system whereby the Bush tax cuts are made permanent.
Obama’s plan sees gains going to all but the top quintile, and the poorest get most. The bottom quintile would see their incomes rise by 5.5 percent, with more modest increases for the next three quintiles– and a 2 percent reduction in the after-tax income of the top quintile. The tax increases are dramatic for those at the very top: after-tax income falls by 8 percent for the top 1 percent, and 11.5 percent for the richest person in a thousand.
McCain, on the other hand, swings the other way. There are practically no gains whatsoever to the first three quintiles, while the fourth quintile receives an after-tax income boost of around 2 percent (much like Obama). But it’s the top quintile that does very well under McCain– instead of seeing their income fall by 2 percent, the McCain proposals would boost their income by 3 percent. And the richer the better: under the McCain proposals, the top 0.1 percent get 4.4 percent.
As I have noted before, we live in an era of rising inequality, witnessing levels of income disparity not seen since the gilded age. Since 1973, real median household income has only risen by by 16 percent, far less than productivity growth. And the entry of women into the labor force complicates this picture– men are actually no better off today than in 1973, and prime-age men (35-44) are 12 percent worse off.
Clearlty, this is an issue in Catholic social teaching. For a start, it emphasizes the importance of a living wage, a family wage. Granted, the structural trends that brought about this new gilded age were not caused by the tax code and cannot be fixed by the tax code– but it would be nice to at least nudge policy in the right direction instead of exacerbating these damaging trends.
Second, social equality– a fair sharing of resources between the classes– is itself a goal of Catholic social teaching. It is in accord with the principles of solidarity and a preferential option for the poor. In Quadragesimo Anno, Pope Pius XI wrote: “riches that economic-social developments constantly increase ought to be so distributed among individual persons and classes that the common advantage of all…. one class is forbidden to exclude the other from sharing in the benefits.” Blessed Pope John XXIII in Mater Et Magistra argued that “the economic prosperity of a nation is not so much its total assets in terms of wealth and property, as the equitable division and distribution of this wealth.”
This is certainly an issue in this election. It is hard to see how McCain’s “preferential option for the rich” is in line with Catholic social teaching, especially in current circumstances.
Reading quickly through the report, it seems to say that married couples filing jointly would see an increse in taxes under the Obama plan vs. the McCain plan which would result in decreases.
MM – Have you considered Nader? His crusade to end corporate personhood and truely universal health care seem to fit will with CST. Not to mention he seems anti-euthinasia, anti-death penalty, and as far as I know, hasn’t given public speeches at planned parenthood events endorsing any and all abortion. think about it.
Wow. Maybe the Catholic candidate is Nader. :)
Good point, Jeremy! I actually really admire Nader for all the good he has done over this years, good that people take for granted. It’s the ego that gets me, though.
Ego??? I’ve been to a Nader speech in 2004, and generally tune in whenever I get a chance, and I haven’t noticed an ‘Ego’. In fact, the part I remember most about the speech is that we all need to be involved citizens, regardless of our political philosophy.
But I suppose anybody who runs for president will have an ego, we are talking about people who think they are qualified to run the most powerful nation in the world, and represent 200 million citizens…. They mere fact that they think they can do the job tells me that they have a pretty big ego.
The specifics of McCain’s tax proposals are, in my view, relatively unimportant. He could promise the top 1% of wage earners a nickel each, or he could say he was going to cut the top rate to zero, so long as the Democrats control congress, it ain’t going to happen. So whether McCain is elected or not, the Bush tax cuts won’t be made permanent, and tax rates will revert in 2011 to where they were at the end of Clinton’s second term. Actually they will be higher, since both Obama and McCain plan on imposing a cap and trade system that will impose hidden taxes in the trillions on energy use.
In your calculus, could the same thing be said about SC nominees who are really pro-life as you say about tax-cuts, with a McCain presidency and an even more Dem controlled congress?
If so, why McCain?
Mark,
Supreme Court nominations are different from taxes in a number of respects. If the President sends a tax bill to congress, they can just ignore it, water it down, pass their own bill instead, etc. In the case of a Supreme Court nomination, however, they have none of these options. They can’t simply ignore the nomination; the public wouldn’t stand for it. They can’t offer their own nominee, so they know that even if they reject a particular nominee, the President could just nominate someone just as bad.
In addition, in the case of a tax people, the Senators pretty much know what they are voting on. They know what taxes the bill would cut and by how much. It’s a lot harder for people to know exactly what a Supreme Court nominee would do on the bench.
I tend to view nominations fights as being fundamentally about public perceptions. If opponents can convince the public that the nominee is too extreme or unqualified for the job, then there will be political cover for the Senators to reject him. If the public likes the nominee, then Senators will be reluctant to vote no.
I have doubts about the kind of justice McCain would appoint if he got the chance. I have no doubt as to the kind of justice Obama would appoint.
BA,
Of course.The public was so outraged with the theatrical attempts to stop the Bork nomination that it never allowed anything like the debacle that led to David Souter. Oh wait, I forgot. :)
Mark,
The Bork nomination is a good example of what I’m talking about. Bork’s nomination failed not because the Democrats controlled the Senate (they controlled the Senate during the Thomas nomination too, and by a larger margin). It failed because the Democrats were able to convince the public that Bork was too extreme for the job.
This is why the cynical me thinks the pro-life (specifically antii-abortion) yield of a McCain vote is very, very little, taking into account all of the variables of political setting.
One other point. I think that Republican Presidents are much more constrained in their ability to appoint moderate or “stealth” nominees than they have been in the past. As the Harriet Miers brewhaha showed, conservatives are quite willing to oppose a Republican nominee if they smell another Souter, and since Democrats aren’t going to be inclined to put up that much of a defense of any McCain nominee, without conservative support anyone he picks is basically sunk. I would expect a McCain presidency to try and find people as near to John Roberts as possible (they might even consider cloning him). Someone with stellar credentials, an attractive demeanor, and a generally conservative aura without much of a specific paper trail.
Given that the top two quintiles currently pay 85% of all federal income taxes, it’s not surprising that just about any tax-cutting proposal would benefit them more than others. By contrast, the bottom quintile has an effective tax rate around 4%. So again, it’s not surprising if it’s hard to reduce the tax burden there unless you’re actively giving money away in the form of tax credits.
Look, I’m moderately open to the idea that cutting personal income taxes further is simply not the responsible approach right now. It’s not like we’re at the ludicrous top rates that we were back before Reagan. But your complaint that under McCain our tas system would be less progressive in any significant fashion is partisanship over an issue that hardly signifies. Under _any_ of the proposals on the table, 50%+ of total federal income tax receipts would still come from the top 10% of earners.
How much do the top two quintiles earn, relative to that of the rest of (some of) us?
Here’s a table that shows average 2005 income for the quintiles and their effective tax rate and the share of total tax revenue they provide:
http://www.marginalrevolution.com/photos/uncategorized/2007/12/18/tax_3.png
The 4th quintile has an average income of 85k and 17% of tax revenue, and the top quintile has an average income of 230k and provides 69% of total tax revenue.
So I’d say that 4th quintile is definitely very comfortable middle class (in all but the most expensive parts of the country) and the top one makes “a hell of a lot more than I do” which is how most of us define “rich”.
I’m not saying that these people don’t deserve to pay lots of taxes. Clearly, they’re benefiting quite a bit from the American system. I’m just saying that given they past most taxes, it’s hardly surprising if a tax cut benefits them.
Now, six years ago our family was in the 2nd quintile (avg income for 2nd quintile is 37k, and they provide 9% of total tax revenues) with two kids, and that year I paid a whopping -500 dollars in income tax. In other words, they paid me $500 after tax credits. Now given that I was getting back more money than had been witheld in the first place, is it surprising that it would be hard to “cut” my taxes even farther? Sure, it would be great to help out some people without kids making 35k, since I’m sure they’re paying at least a little in taxes. But there’s just not much to cut.
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