This is the second of a three-part series on the Presidential candidates. Today I take a look at what Senator John McCain proposes in his tax plan.
Here are the basics of what Senator McCain proposes (most of the following is taken from John McCain’s web site):
1. Keep Tax Rates Low. Senator McCain proposes keeping the current tax rates.
2. Phase out the Alternative Minimum Tax (AMT).
3. Lower the corporate tax rate from 35% to 25%.
4. Allow businesses to fully expense first year equipment and technology expenses.
5. Add a credit for businesses equal to 10% of wages that are spent on Research & Development.
6. Ban taxes on the Internet.
7. Ban new taxes on cellular phones.
John McCain also proposes to eliminate wasteful spending. Senator McCain wants to balance the budget by 2013 (conveniently right after his term in office would end).
Senator McCain’s health care plan involves eliminating the deductions for health care (mainly a business/corporate deduction) and replacing these with tax credits. For most Americans this would equate to a slight savings (based on after tax dollars).
Senator McCain wants, “a one year spending pause. Freeze non-defense, non-veterans discretionary spending for a year and use those savings for deficit reduction.”
Senator McCain has stated on various occasions he’d like to see the inheritance tax exclusion at $5 million. He has also publicly stated that he’s for extending the Bush tax cuts.
Unlike Senator Obama’s plans (which are somewhat detailed on his web site) Senator McCain’s plans are not as detailed. Perhaps that’s because he’s proposing far fewer new programs (and, thus, a much lower need of new revenues) and is actually proposing things like cutting all earmarks.
Yet without the meat it’s difficult for anyone to do anything but give a broad critique. No one likes to be pinned down and as I mentioned Senator Obama is as guilty as Senator McCain. Still, I think it’s a worthwhile exercise to see where Senator McCain’s policies on taxes would likely lead.
First, while I’d love to see corporate tax rates fall (since corporate taxes are always passed on to consumers, cuts in corporate tax rates always benefit consumers) I don’t see that happening. Most Americans are unaware of the economic impacts of corporate taxes, and most politicians like to criticize corporations.
Second, attempting to balance the federal budget is a worthwhile goal. Yet without major cuts in multiple programs it just can’t happen. Add in a probable recession (which will likely lead to more government spending) and you have an impossible goal. Senator McCain’s head is in the sand on this issue.
The one proposal of Senator McCain’s that I hope whoever is elected implements is the vetoing of all bills with earmarks. A million here and a million there and you soon have a leak in the system, so to speak. Will Senator McCain follow through on this if he’s elected if Senator Smith puts in a $10 million earmark on the defense appropriations bill? I’m actually optimistic on this issue.
But I think all legislators need to look at fiscal discipline. That’s a goal of Senator McCain’s but I don’t see it as a goal of many in Congress.
Yet Senator McCain proposes billions in tax cuts (according to the non-partisan Committee for a Responsible Federal Budget, it’s about $450 billion). Eliminating the AMT is a good goal, but where is the federal government going to replace that revenue? Sure, if enough federal programs are cut the revenue wouldn’t be needed but how often have you seen a federal department or program eliminated?
I don’t see many (any?) of Senator McCain’s proposals getting through an ideological Democratic Congress. That isn’t so bad—we’d have the current (flawed) system. Senator McCain also hasn’t identified any programs that he would eliminate (save earmarks). Cutting earmarks would save maybe a billion dollars, but that’s nowhere near enough money to fund his programs. Just saying that you are going to conduct a review of all programs (which will cost money, of course) and that there will magically be some that can be eliminated borders on wishful thinking.
Still, Senator McCain has some good ideas. The devil is in the details, and those are lacking today.
In part three I’ll examine the two candidates side-by-side. I’ll also note the impact that Congress will certainly have on each candidate’s goals.