McCain, Obama will add to debt
2008-06-11 20:05
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President-elect Barack Obama's incoming administration could include Republicans, or even some members of the current Cabinet, a top transition aide says.
Washington - US presidential candidates John McCain and Barack Obama would add trillions of dollars to the federal debt through tax cuts under current spending assumptions, according to an Urban Institute study released Wednesday.
The study's authors noted that both candidates lack specificity in their plans, but their preliminary analysis showed that McCain's plan would add $4.5 trillion to the debt over 10 years, while Obama's would add $3.3 trillion. The analysis uses Congressional Budget Office figures for spending, which it said were "relatively optimistic assumptions."
Both candidates, as the study notes, have offered major changes to the tax code. McCain would increase the exemption for taxpayers with dependents, reduce corporate income taxes and permanently extend President Bush's 2001 and 2003 tax cuts. Obama would extend only some parts of Bush's tax cuts, while increasing the capital gains tax rate and offering targeted tax breaks for low-to-middle income taxpayers.
Compared with the current law, the Urban Institute study found that Obama's proposals would reduce tax revenue by $2.7bn over the next 10 years, while McCain's reduce revenues by $3.7 trillion.
But both candidates also have their own plans for offsetting their tax measures. However, they depend largely on politically difficult tasks such as closing tax loopholes and reining in federal spending.
"The big wild cards are the revenue raisers that Obama has and the spending cuts that McCain has," said the Brookings Institution's Bill Gale, who spoke at an Urban Institute event Wednesday.
The effects of the two candidates' plans on tax distribution are stark. While Obama's plan would result in average tax cut of $567 for the bottom 20% of taxpayers and a tax hike of $4 093 for the top 20% of taxpayers in 2009, McCain's plan would offer a cut of $19 for the bottom 20% of taxpayers and a decrease of $6 264 for the top 20% of taxpayers in 2009.
"McCain looks like he cuts taxes more, but he cuts taxes in a more regressive way," Gale said.
- Dow Jones
- Dow Jones