Monday, July 07, 2008

Now Isn't That Special (Interest)?

It's a "just do the math" wonkfest special this week for the holiday weekend. My suggested headline was "When The Candidate’s A Special Interest" but the editor disagreed, and after all my weeks of you reading me kvetch about the headlines -- people, he was right. There, I said it. This is a wonkier version of the Andy Borowitz column, "McCain Proposes Tax Holiday for Beer Heiresses." Newspaper version here.

East Valley Tribune, Jul. 6, 2008

When is a “special interest” just so special that it’s no longer special? When it’s your own economic interest.

Guess who benefitted from the Bush tax cuts, and now wants to keep them and add additional cuts benefitting those at the very tippy-top of the income distribution? Naturally, it’s John McCain.

The Center for American Progress took the candidates’ tax plans and 2006 tax returns and figured out how much each would gain under their own policies. (The analysis is a bit rough, because McCain and his spouse file separately and she’s refused to release much information about her taxes. This was a huge scandal in 2004 when the spouse involved was married to Sen. John Kerry, but apparently it’s not a problem if the spouse is married to a Republican.)

Both McCain and Obama have done very well. In 2006, Obama and his wife had total income (2 salaries) of just under $1 million; that put them in the top 0.5 percent of all taxpayers. For their part, the McCains had total income of a little more than $6.4 million, which ranked them in the top 0.1 percent.

The Obamas numbers jumped in 2007, when his book sales took off; their income increased to $4.2 million, but we can’t compare them to the McCains because the McCains’ haven’t released their 2007 tax returns yet -- if they ever will.

Most of the McCains’ income comes from Schedule E of the 1040 form, which they’ve refused to disclose. Schedule E includes business income from real estate, S corporations, and partnerships, and all we know is the raw number -- which could understate actual income, because some Schedule E income gets special treatment and tax breaks, like accelerated write-offs. So the McCains had at least $6.4 million in income in 2006, but it could have been more.

So using the minimum 2006 numbers, what did the Bush tax cuts mean to Obama and McCain? The Obamas got a tasty tax break of $38,169, but they were pikers compared to the McCains, who pocketed $313,413. Now let’s project these incomes to 2010, when the Bush tax cuts are fully phased in. Assuming both make exactly the same, the Obamas would get $47,082 in tax cuts, but the McCains receive $361,830.

So much for Bush; both Obama and McCain have issued tax plans. McCain’s would make the Bush tax changes permanent, repeal the Alternative Minimum Tax, double the dependent exemption, and provide tax breaks for Schedule E business income. (Who could have guessed?) Obama would eliminate the Bush tax cuts for taxpayers making over $250,000 a year while retaining most of the child and dependent care credit, and offer a tax credit of $500 to middle- and lower-income workers.

How would each do under their own proposals, using the 2006 numbers? Under Obama’s plan, compared to 2000 tax law, their family saves $6,124, while the McCains save $5,641. Remember, in 2006, the McCains made six times what the Obamas did; under Obama’s plan, the tax cuts phase out as income increases.

McCain’s plan does just the opposite; it’s worth more to those with more -- a lot more. Under McCain’s plan, in 2006 the Obamas, with their nearly $1 million income, would get a tax break of $49,392 compared with 2000 law. But the McCains, because they made so much more, would get a “progressively” larger tax cut -- $373,429.

Maybe if you own seven homes and since 2004 have purchased $11 million worth of real estate and spent $273,000 on household staff in 2007, giving yourself a tax break of $373,000 is just rounding error. But if you want to know who benefits under John McCain’s tax plans, the answer is pretty simple: John McCain.

It’s a pretty nice deal for the economic elite he’s offering. And using his own example, McCain’s not rewarding entrepreneurship; the family money comes from selling alcoholic beverages, a totally regulated business, with huge barriers to entry.

People like to think that rich candidates don’t have to reward campaign donors. Yeah, because they’re too busy rewarding themselves.

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