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More Tax Cuts! More Spending! More Four-Point Plans!

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The economic plans are coming fast and furious. Whoa --there goes another one! Here's a rundown of what McCain and Obama have put on the table in the last few days.

BARACK OBAMA
Given notice that John McCain was planning to unveil new economic proposals on Monday, Democrat Obama beat him to the punch. Speaking in Toledo, Ohio, a --surprise! -- swing state, Obama offered up his "Economic Rescue Plan for the Middle Class" (details available as a PDF here), which contained these new elements:

1. A $3,000 tax credit for each new job an existing business creates in 2009 and 2010. The credit will be refundable, and sufficient, according to the campaign, to "offset the entire added payroll tax costs to the company for the first $50,000 of income for the new employees."

2. Waiving the penalties for "hardship withdrawals" from IRAs and 401(k)s. Obama proposes changing the law to allow families to withdraw early 15 percent of their retirement savings — up to a maximum of $10,000 — in 2008 and 2009.

3.On the other hand, Obama would have the Treasury Department to waive rules that force retirees to withdraw money from their tax-favored accounts, so that seniors aren't required to cash out at a loss. According to the campaign, this would not require a change in the law.

4. Further extend unemployment insurance and temporarily suspend taxes on it.

5. For some homeowners acting in "good faith," a 90-day foreclosure moratorium. Financial institutions participating in the Treasury's financial rescue plan would be required establish a "homeowners code of conduct," which would include the moratorium.

6. A federal lending facility for state and local governments unable to borrow money. To be orchestrated through the Federal Reserve and Treasury Department, the facility would be similar to the government's intervention in the short-term commercial paper market. (California recently worried publicly that it might have to borrow $7 billion, but then it changed its mind.)

JOHN MCCAIN
Not to be outdone, the Republican, after some confusion, did eventually announce his own slate of ideas, which he called his Pension and Family Security Plan. (This was Tuesday, in the former swing state of Pennsylvania.) They included these new elements, some of which are similar to what Obama proposed the day before:

1. Taxing IRA and 401(k) withdrawals up to $50,000 at just ten percent (the lowest tax rate) in 2008 and 2009. McCain seems to want to limit the benefit to seniors, and doesn't mention waiving early withdrawal penalties.

2. Waiving the rules that force retirees to withdraw from their tax-favored accounts.

3. Increasing the amount of capital losses that can offset ordinary income. McCain would raise the limit from $3,000 to $15,000 in the 2008 and 2009 tax years.

4. Reducing the long-term capital gains tax by half to 7.5 percent in 2009 and 2010.

5. Suspending the tax on unemployment benefits in 2008 and 2009.

Ironically, in introducing his own proposals, McCain criticized Obama's plan to waive penalties on early retirement account withdrawals; he called it " an invitation to capital flight." Hello, pot -- meet kettle. If anything, McCain's plan would encourage an even greater "exodus of capital." The limit on his temporarily tax-favored withdrawals is much higher than Obama's penalty-free cap. And if you were an investor faced with the choice of cashing out early and taking the 7.5 percent tax rate or waiting and paying a rate of 15 percent or more, what would you do? I thought so.

If you're wondering how these new ideas fit in to the candidates' existing plans, check out the voter guides on Inc.com's special election page. We'll be updating them shortly to reflect these new additions.

Last updated: Oct 15, 2008




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