Summary of Candidate Tax Plans

As the presidential campaign heats up, the two candidates are setting their respective tax agendas. Both plans will continue to be fine-tuned as the election approaches, but here are some specifics on what we know so far.

Sen. Barack Obama’s plan

Obama wants to scale back tax breaks created by the Bush administration while adding tax benefits for lower earning Americans.

Income taxes: Obama advocates raising tax rates for the wealthiest taxpayers and reducing rates for the rest of the population. Higher taxes would apply to individuals earning more than $250,000. For example, the top individual income tax rate would be raised from 35% to 39.6%. (For 2008, the top rate applies to taxable income above $357,700.)

Capital gains and dividends: Currently, the maximum long-term capital gains and qualified dividends rate is 15%. Obama wants to raise it for families with incomes above $250,000 to 20% or higher with a 28% cap.

Social Security taxes: The Social Security tax wage ceiling ($102,000 for 2008) would be partially removed. A higher tax would apply to wages exceeding $250,000.

Sen. John McCain’s plan

McCain would extend the Bush tax cuts while creating new tax breaks such as higher exemptions for dependents.

Income taxes: McCain wants to make the current tax rates permanent. The tax brackets would continue to be indexed for inflation.

Capital gains and dividends: The current capital gains structure would be retained. But political reality could force McCain into a compromise. Note: The 15% rate is scheduled to increase after 2010 if Congress doesn’t take any action.

Social Security taxes: The wage ceiling for Social Security tax would not be removed. The Medicare tax would still apply above the wage ceiling.

Summary of Candidate Tax Plans provided by the Tax Foundation, an independent nonprofit organization.

Both John McCain and Barack Obama have proposed tax plans that would substantially increase the national debt over the next ten years, according to a newly updated analysis by the non-partisan Tax Policy Center.  Analysis of the 2008 Presidential Candidates' Tax Plans prepared by Urban-Bookings Tax Policy Center.