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Fiscal face-off: Obama and McCain battle over economic plans and tax policies.

ANYONE WHO DOUBTS THAT THE American dollar just isn't what it used to be need look no further than the nation's record job losses, exorbitant food and gas prices, and unprecedented home foreclosure rates. These and other bread-and-butter issues will be at the forefront of voters' minds when they head to the polls in November, and the outcome of the presidential election will likely depend on which candidate they believe has the best plan to reverse these economic trends.

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Sens. John McCain and Barack Obama, the presumptive nominees, have released tax plans that offer distinctly different approaches each claim will help cure the nation's economic woes.

McCain's plan includes cutting the estate tax, eliminating the Alternative Minimum Tax, eventually doubling the $3,500 child tax deduction for every dependent, and providing refundable tax credits of $2,500 for individuals and $5,000 for families, who buy health insurance.

Obama's plan calls for a $50 billion stimulus package that would provide energy rebate checks for many families, a fund to help families avoid foreclosure, and increased assistance for states hit especially hard by economic setbacks. He also wants to eliminate income taxes for retirees making less than $50,000 a year, mandate automatic 401(k)s and IRAs, offer income-related subsidies for health insurance, and expand child and dependent care tax credits.

Obama's plan would also make permanent select provisions of President George W Bush's tax cuts but would allow other aspects of the cuts to expire for taxpayers earning more than $250,000 a year. He would make the estate tax cut permanent with a $3.5 million exemption (meaning estates that fall below this cutoff pay no estate taxes) and a 45% rate. In addition, Obama's plan offers individuals a refundable "Making Work Pay Credit" of 6.2%, on up to $8,100 of earnings.

McCain proposes to make permanent all of the provisions of the Bush tax cuts except for the estate tax repeal, instead favoring a $5 million exemption and 15% rate. The current tax law under Bush has a $3.5 million exemption for 2009 and a max rate of 45%, with a scheduled repeal in 2010.

McCain's tax plan is basically an extension of the current Bush tax cuts, says Michael Tanner, a senior fellow at the Cato Institute, a nonprofit public policy research foundation headquartered in Washington, D.C. Without that extension, "what you're going to have is effectively a tax increase because people who pay one level will end up paying [a higher] level in the future, and that will have a negative effect on the economy. [The theory is that] people faced with higher taxes will invest less and do less to create jobs, and that will create problems."

Tanner says McCain also wants to institute a number of corporate tax cuts, particularly lowering the business tax rate to encourage economic growth and job creation. "That is something that seems to be growing in popularity among a number of economists because the U.S. has one of the highest corporate tax rates in the world."

William Spriggs, who chairs Howard University's economics department and is an Obama supporter, sees things differently. He asserts that making the Bush tax cuts permanent, could increase the deficit even further. "If McCain's not going to give us the deficits of Bush, he will have to make very dramatic cuts in the federal budget, and the question is how and where," Spriggs says.

McCain's proposals are clearly oriented toward making a tax system more favorable for high-income individuals and businesses, says Margaret Simms, an Urban Institute senior fellow. Obama's proposals are more tailored to people who earn lower incomes, to provide incentives and additional disposable income. "Broadly characterized, Obama's plan would be more favorable to African Americans. While it's true that African Americans are doing better than they have in the past, on average, they're still disproportionately in those lower income categories" she adds.

At-A-Glance

Obama and McCain's Pledge's to America

Obama

* Additional $50 billion economic stimulus package

* Cut taxes by $1,000 for 95% of workers and families

* Eliminate incomes taxes for seniors making less than $50,000

* Automatically enroll every worker in a portable pension plan

* Provide a $4,000 tax credit toward college education costs

McCain

* Balance the federal budget by end of his first term

* Eliminate the Alternative Minimum Tax

* Double the personal exception for dependents

* Provide tax credits to companies for research and development

* Provide refundable tax credits for those who buy health insurance

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Title Annotation:WASHINGTON REPORT; Barack Obama and John McCain on economic policies and tax policies
Author:Jones, Joyce
Publication:Black Enterprise
Geographic Code:1USA
Date:Sep 1, 2008
Words:758
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