This article was last updated on August 3
Source: Parade magazine and the Tax Policy Center
Simply put: If your annual salary is less than $112,000, you’d pay less in taxes under Obama’s plan; if your salary is higher, McCain would cut your taxes more. Obama is choosing to emphasize tax cuts for the middle class, whereas McCain’s strategy is to keep rates lower at the top as a way to facilitate long-run growth. For example, a person with an income of $1 million could see his taxes increase under Obama by as much as $94,000, whereas under McCain’s plan he could save about $48,000. Pretty standard Democrat and Republican policy. Overall though, under Obama and McCain the effective marginal tax rate will fall from 24.2% to 24.1% and 22.6% person respectively.
After reviewing the table and report, I can see one gap in Obama’s tax cut promises. He says 95% of Americans would pay less taxes as borne out by the above table, but this is not the same as 95% of American households. Key difference if you ask me. The median annual US household income in 2007 was $50,233.00 according to the Census Bureau, whereas the median income per household member was $26,036. Which means that the median household income was almost twice the single income median. Given more than 20% of households earn more than $100,000, not everyone will benefit as much as advertised under an Obama regime and a number of households could be better off under McCain.
Anyway, I don’t think tax rates will be a major decider of our next president. There are bigger issues on the table, but it is still good to know how your overall bottom line will be affected in the year ahead.
For more on the Obama and McCain financial plan check out this more recent post: Your Financial Future – McCain vs Obama
– Taxes and my Paycheck