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WHAT THE EXPERTS SAY ABOUT THE McCAIN AND OBAMA PLANS:

For Individuals: According to the Tax Policy Center, a nonpartisan center-left organization, Americans up until the 99th percentile are more likely to see a tax cut than a tax increase under Obama's proposals. Only the richest one percent or so -- those with household incomes north of $500,000 in 2009 -- would be more likely to face a tax hike. The nonpartisan Tax Foundation, which is generally sympathetic to lower taxes, particularly on the capital class, takes the analysis one step further. "The Obama plan would redistribute more than $131 billion per year from the top 1 percent of taxpayers to all other taxpayers," writes Foundation president Scott Hodge.

The Tax Policy Center concludes that McCain's proposed tax cuts are far more regressive than Barack Obama's. Though nearly everybody would pay lower taxes under McCain, most Americans would get a smaller tax cut than under Obama's plan. Moreover, nearly three-quarters of taxpayers with small business income fall into the 25 percent tax bracket or lower, and most would end up with substantially more after-tax income under Obama's plan than under McCain's. Only the top 20 percent of earners -- those with incomes of more than $112,000 in 2009 -- do better on average with McCain than Obama. (The top one percent do especially well.) Some argue that these are most likely to include small employers.

For Businesses: The Tax Policy Center, referring to McCain's plan to cut corporate tax rates, says that "other countries have been lowering their corporate tax rate and broadening the base and similar changes in the United States could be beneficial." (The Center, though, also warns that a corporate tax rate that is 10 percent lower than the highest individual tax rate will tempt some wealthy people into repackaging themselves as corporations.) Of course, only about 20 percent of small businesses are organized as corporations, but Cap Willey, past chair of the National Small Business Association, believes the influx of international capital will benefit the entire economy, including small firms. "Small businesses supply a lot of those companies. And it creates jobs for people." Willey doesn't object to the repeal of the domestic production tax. "It's a roundabout way to try and lower the effective tax rate for businesses by three percent." And, he adds, it's not as important to small firms as the Section 179 provision.

Venture capital fund managers, speaking generally about carried interest, insist that taxing their profits as income rather than capital gains, as Obama proposes, would discourage their interest in venture investing. However, the Tax Policy Center's Roberton Williams is skeptical. "When we see tax rates go up and reported income go down, we don't know if people have changed their behavior and are earning less money, or they've found different ways to characterize their income," he says. "That said, economists generally believe that the behavioral effects of tax increases tend to be small. In the short run we see noticeable changes, but two or three years down the road, behaviors don't look very different."

For Government Revenue: The Tax Policy Center also finds that while both plans would reduce the U.S. Treasury's tax revenues compared to current law, the shortfall in McCain's agenda is much larger -- $7 trillion over ten years -- if the AMT is repealed. A McCain adviser told the Center that the campaign calculates that the optional tax would be revenue-neutral to the government, but the Center finds that "implausible."

Correction: The original version of this story incorrectly stated that John McCain's tax plan would make permanent the limits for Section 179 expensing included in the 2008 stimulus.

Note: This article is an updated version of the original guide to Taxes.




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