Brad DeLong has a hot tip from Jason Furman
I quote a bit of Brad’s quote of Furman
Today, the Tax Policy Center released a new analysis of the McCain and Obama tax plans, which provides a comparison between what each of the candidates says on taxes (their actual plans) and what their campaign advisors claim. It finds that the true cost [over 10 years] of Senator McCain’s tax proposals is $2.8 trillion larger than what his advisors have acknowledged. And most of that $2.8 trillion is the cost of yet more tax cuts for corporations and the wealthy. The plan still offers very little for ordinary Americans.
I think the key bit of the tax policy center report is (emphasis mine)
In several important ways, the candidates’ speeches and web sites differ from the plans as we’ve outlined them above, and, in several cases, descriptions of proposals provided by campaign advisors strike us as implausible. Senator McCain has said repeatedly that he would repeal the
individual AMT, allow businesses to expense all investments in equipment immediately, double the deduction for dependents, and give individuals the option to pay tax under a simplified alternative tax system. The campaign advisers say that the AMT will be patched but not eliminated except under the simplified alternative system, that only short-lived investments (for which expensing is not worth much) would qualify for immediate deduction, that the larger deduction for dependents would phase in slowly (and never equal twice the current-law deduction), and that the simplified alternative tax system would be revenue neutral. The last assertion is particularly questionable: few taxpayers will choose to pay an alternative tax if it does not reduce their tax bill, so an optional alternative is only revenue neutral if almost nobody elects it, which is probably not what the candidate has in mind. We estimated the cost of Senator McCain’s plan as described on the stump, assuming that all the provisions are fully effective immediately and that the optional alternative tax system is similar to the one proposed by the Republican Study Committee. Under those assumptions, the revenue loss attributable to the Senator’s plan increases to almost $7 trillion over the 10-year budget window.
I think that Len Burman Surachai Khitatrakun Greg Leiserson Jeff Rohaly Eric Toder
Bob Williams are heroes. I also think that this line about how an alternative tax option would be revenue neutral help provoked them into calling the McCain campaign out. That is not just a lie, it is an insult to their intelligence.
Below their thoughts on what Obama really has in mind.
Senator Obama’s proposal to exempt seniors with income below $50,000 from income tax but continue full taxation starting at $50,001 also strikes us as impractical and undesirable. Any actual legislation would have some kind of phaseout to avoid a “cliff” at $50,000. Also, Senator Obama has spoken often about subjecting high-income taxpayers to additional taxes to help shore up Social Security, although his campaign advisers insist that there is no specific proposal. We estimated the cost of Senator Obama’s proposals assuming all of the provisions are fully effective immediately, that the seniors’ exemption would phase out over a $10,000 income range, and that the Social Security proposal would impose a 2 percent income tax surtax on adjusted gross incomes over $250,000 and a 2 percent payroll tax paid by employers on employees’ earnings above that threshold. Under those assumptions, the Senator’s proposals would reduce revenues by $2.4 trillion over 10 years, or about $367 billion less than the proposals as described by his campaign advisers.
I really have no idea what Obama’s advisers “insist” that there is no such plan. I think a tax increase on the very rich dedicated to the social security trust fund would be very popular. I certainly love it and have bitterly criticized the TPC for leaving it out of their earlier analysis. I note that the Obama campaign has talked about a tax from 2 to 4% so the amount raised could be much more than $ 367 billion over ten years. I guessed that it was designed to roughly balance the making work pay tax cut (still might be at the higher level) here (search for Waldmann).
Also recall the appalling L.A. Times article which claimed that Obama’s numbers don’t add up (and barely mentioned the fact that McCain refuses to release numbers and that his mumblings aren’t in the ball park … or the solar system). At the time Kevin Drum noted that, according Peter Nicholas of the the LA Times Obama was only a few tens of billions short of adding up counting the expiry of the Bush cuts for families with income over $200,000 and the end of the Iraq war (Nicholas actually said that Obama was vague about how fast he proposed getting out of Iraq). The math: Nicholas claims $130 billion/year of spending increases (mostly health care reform) and $ 80 billion/year in tax cuts vs $100 billion in letting Bush’s tax cuts for those making over $200,000 lapse and maybe $ 90 billion/year saved by leaving Iraq. Oh with at least $30 billion/year with the donut plan, Obama’s proposals are revenue neutral. I guessed so at the time in a comment on Drum’s post.