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With new calls to make them permanent before they expire in 2010, the Bush tax cuts are once again a topic in Congress. As with most well-off people, since 2000 John and Cindy McCain and Barack and Michelle Obama have seen substantial tax cuts. With the availability of these couples’ 2006 tax returns, we can calculate how much they have saved and how much they would save under their own tax plans. The numbers below are based on their 2006 tax returns; if they earn more or less in the future, their benefit would of course change.
Line 1: This is how much the candidates saved on their 2006 tax returns because of the Bush tax cuts. His tax cuts were not fully phased in at this point (the removal of limitations on the deductions and exemptions for high-income taxpayers had not been fully implemented). So, in 2006, McCain made $313,413 because of the Bush tax cuts. The Obamas made $38,169.
Line 2: This is how much the candidates save with the Bush tax cuts fully phased-in—scheduled in law for 2010. The McCains would pay $361,830 less in tax, the Obamas $47,082.
Line 3: This is how much the candidates would save from the McCain plan as compared to tax law in 2000. In other words, this is the value of allowing the Bush tax cuts to become fully effective and become permanent, and also providing the added tax relief that McCain seeks (like repealing the Alternative Minimum Tax). The McCains would save $373,429 under his plan and the Obamas would save $49,392.
Line 4: This is how much the candidates would save from the Obama plan as compared to tax law in 2000. It appears that by preserving provisions that primarily benefit those making less than $250,000, he preserves tax breaks for both himself and McCain to the extent those provisions also apply to higher-income taxpayers.
Line 5: This is the difference between the candidates’ tax liabilities under their two plans. McCain’s plan would give him $367,788 more in tax breaks than Obama’s plan. Obama would save more under McCain’s plan as well—$43,268.
The temporary tax cuts passed early in President Bush’s presidency are again a hot topic as members of Congress—most prominently Sen. John McCain (R-AZ), the presumptive Republican nominee for president—call for them to be made permanent (they are currently set to expire in 2010). The fact that these tax cuts have been a boon to the wealthy is, of course, no secret. When fully phased in, over half of the tax breaks go to the richest 1 percent of taxpayers and over 70 percent go to the best-off 20 percent. Only 15 percent of the tax cuts go to the bottom 60 percent of taxpayers.
These statistics are informative, but it’s also good to have examples of the impact of the Bush tax cuts on real taxpayers, and the consequences of making them permanent—in particular, examples of real live wealthy people whose tax returns can be dissected to discern how the various provisions of the Bush tax legislation affected their tax liability. Generally speaking, well-off taxpayers aren’t, however, inclined to let anyone see their tax returns, which is why we’re often left with just the bare statistics.
Fortunately, however, two prominent married couples have recently revealed a great deal of information from their tax returns: John and Cindy McCain and Barack and Michelle Obama. They’ve provided enough information that the effect of the Bush tax cuts on these two families can be calculated. McCain and Sen. Obama (D-IL), the presumptive Democratic presidential nominee, have also detailed their own tax proposals to allow us to examine how the McCains and the Obamas would fair under their two tax plans.
In the case of the Obamas we have their complete 2006 and 2007 returns. For the McCains we have incomplete information for both years—but enough for 2006 for us to accurately estimate a range of possible savings. Let’s begin the analysis with a look at their current incomes.
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Vice President, Economic Policy