The latest analysis of Obama’s and McCain’s tax plans show that both candidates will likely raise the marginal tax rate paid by most Americans:
Senator Obama’s tax plan includes a number of proposals for new or expanded tax benefits that are generally targeted to low- and moderate-income taxpayers. Many of these additions to the “skyline” change taxpayers’ effective marginal tax rates in important ways, lowering or raising them, sometimes significantly. …
Senator McCain’s tax plan also affects marginal rates, but for very different reasons. His tax plan includes only two individual tax proposals and only his health tax credit has a material effect on effective marginal tax rates.
For those of you who slept through Tax, the marginal tax rate is the tax you pay on your last dollar of income. A high marginal tax rate (generally) represents a direct disincentive to making more money.
The marginal tax rate will increase to 50% under Obama’s plan, 40% under McCain’s plan. For the visually inclined, TaxProf Blog has charts that show the effects of both plans — thankfully based on double income homes.
Does anybody still believe anything they hear? After the jump.
Here’s a question that still hasn’t been answered (by lawyers, pundits, or even Kirkland & Ellis): does anybody still think that either of the candidates’ tax plans bear any relation to what will actually happen once one of these guys takes office? Every single debate the candidates are asked some version of “Given the bailout, what are you going to have to give up when you take office?” Every time, the candidates answer “Things! We’ll have to look at things and some things will look different.”
Walter Mondale once said “Ronald Reagan will raise your taxes, and so will I.” Of course, Walter Mondale is now under the one of the endzones in Giants Stadium.
It is hard to imagine a world where the effective tax rate doesn’t go up for many Americans.
But the marginal tax could be an interesting indicator, especially for Biglaw associates. You don’t want a bonus or even a really good weekend in Vegas to ruin your April.
Marginal Tax Rates Under Obama (50%), McCain (40%) [TaxProf Blog]
Earlier: Debate Night At Kirkland & Ellis