Tax plans offer middle-income families a $1,000 break

BRIAN TUMULTY

WASHINGTON — The presumptive presidential nominees of the two major political parties each would reduce taxes for a middle-income household earning $66,354 a year by about $1,000 in 2009, according to an analysis released Wednesday by the nonpartisan Tax Policy Center.

The tax analysis comes about a week after Barack Obama clinched the number of delegates need to secure the Democratic presidential nomination, making it nearly certain he will face Republican John McCain in the November election.

On the campaign trail, both candidates are emphasizing economic issues this week and have exchanged charges over the content of their economic plans.

The Tax Policy Center's independent analysis of the pieces of each tax package estimated Obama's plan would provide $1,042 in tax cuts for Americans in the middle 20 percent of income while Republican John McCain's plan would provide about $1,009 — $33 less.

Overall, the plans have many differences. Obama's tax cuts would aim more toward lower- and middle-income households while McCain's plan would favor higher income households with the biggest tax cuts.

Families in the lowest 20 percent of income — earning about $18,981 annually — would get an estimated tax cut of $567 under the Obama plan but only $19 under the McCain plan in 2009.

Those in the top 1 percent of income — earning $603,402 a year — would face a dramatically different situation. They would pay $115,974 more in taxes under the Obama plan while getting a $45,361 tax cut from the McCain plan.

Plans add trillions in debt

Both proposals would significantly increase the national debt over the next 10 years.

Obama is promising to cover the cost of his tax cuts with new revenue and savings from withdrawing troops from Iraq. McCain promises to freeze federal spending on non-defense and non-veteran related programs his first year in office and make spending cuts in future years.

Officials of the Tax Policy Center estimate Obama's plan would add $3.3 trillion in new debt while McCain's plan would add $4.5 trillion.

On the campaign trail, neither candidate has offered a detailed plan to balance the federal budget.

McCain has accused Obama of proposing the largest tax increase in U.S. history, which the authors of the new study described as wrong.

"Low- and middle-income taxpayers would undoubtedly be paying lower taxes under the Obama plan," said Len Burman, director of the Tax Policy Center and a former Treasury official in the Clinton administration.

Other highlights:

Obama would eliminate President Bush's tax cuts for high-income families earning more than $250,000 in 2009 instead of waiting until they expire in 2011.

Obama would increase taxes for middle-income senior citizens by an estimated 2.9 percent. Although people 65 and older would pay no income taxes if they earned less than $50,000, there would be no tax break for an estimated 10 million senior households with incomes higher than that. And seniors in those higher income brackets would pay higher tax rates on capital gains and dividends.

McCain would rely on phase-in periods to keep the cost of the tax cuts lower than they might otherwise be. For example, he would phase in an increase in the exemption for dependent family members.

McCain's largest tax cuts would go to married couples because they are the most likely to be in the highest income brackets.