The Taxman Cometh, and he’s conflicted a bit

Sen. McCain and Sen. Obama have taken to sniping back and forth over taxes and it doesn’t appear this debate will end anytime soon. Sen. McCain dished out some tough criticism of Sen. Obama’s tax plan and economics policies while backing up his new friend, “Joe the Plumber.” Meanwhile, Sen. Obama has taken to hitting McCain alleging that his tax plan only supports the wealthy.

Report from USAToday:

In his acceptance speech at the 1984 Democratic convention, Walter Mondale promised to reduce the budget deficit by raising taxes. He later went on to lose every state but his home state of Minnesota and Washington, D.C.

It’s not surprising, then, that despite a ballooning budget deficit and a recently enacted $700 billion financial bailout, John McCain and Barack Obama have pledged to lower taxes for millions of Americans.

McCain wants to extend the Bush administration’s 2001 tax cuts, double the personal exemption taxpayers can claim, and lower corporate tax rates.

Obama wants to roll back some of the tax cuts for the wealthiest Americans and increase corporate tax rates, while reducing taxes for low- and middle-income families.

This week, both candidates proposed temporary tax cuts designed to help Americans cope with the financial crisis, which has sharply reduced the value of their retirement savings. McCain wants to cut the capital gains rate in half, reduce the tax on withdrawals from retirement savings to 10%, and waive a rule that requires seniors to start taking withdrawals from tax-deferred retirement savings at age 70½. Obama would permit savers to take penalty-free hardship withdrawals of up to $10,000 from their 401(k) plans and individual retirement accounts in 2008 and 2009. Both candidates have proposed suspending taxes on unemployment benefits.

But whoever takes office on Jan. 20 will confront a brutal fiscal reality. The Congressional Budget Office estimates that the nation’s debt will swell to $2.3 trillion by 2018. The non-partisan Tax Policy Center estimates that Obama’s tax package would add $3.5 trillion to the total, while McCain’s proposals would add $5 trillion.

Douglas Holtz-Eakin, McCain’s senior policy adviser, says McCain’s tax cuts would create more jobs. “The centerpiece of Sen. McCain’s approach to deficit reduction is to get the economy going,” he says.

Brian Deese, Obama’s deputy economic policy director, says Obama has “put together a package of pro-growth tax cuts aimed to help middle-class families who are struggling the most in the current economy.”

McCain has pledged to eliminate earmarks and wasteful spending, while Obama has targeted tax loopholes. But neither candidate has offered a realistic plan to pay for their tax proposals, says Leonard Burman, director of the Tax Policy Center.

In addition, reducing domestic spending is a lot harder than it sounds, says Clint Stretch, managing principal for tax policy for Deloitte Tax. “Things like aid to higher education, air-traffic controllers, roads, bridges, are not easily cut,” he says.

Burman says whoever wins the election will soon confront the “overwhelming realities” of the national debt. For now, though, “Both campaigns have made a political calculation that they want to talk about happy things.”

Video from CNN of McCain making some of these statements:

Meanwhile, McCain has played the “socialist card,” if there’s such a thing, as the way he described Obama’s plan, report from Yahoo News:

CHARLOTTE, N.C. – Republican presidential candidate John McCain on Saturday accused Democratic rival Barack Obama of favoring a socialistic economic approach by supporting tax cuts and tax credits McCain says would merely shuffle wealth rather than creating it.

“At least in Europe, the Socialist leaders who so admire my opponent are upfront about their objectives,” McCain said in a radio address. “They use real numbers and honest language. And we should demand equal candor from Sen. Obama. Raising taxes on some in order to give checks to others is not a tax cut; it’s just another government giveaway.”

McCain, though, has a health care plan girded with a similar philosophy. He proposes providing individuals with a $5,000 tax credit to buy health insurance. He would pay for his plan, in part, by considering as taxable income the money their employer spends on their health coverage.

McCain leveled his charge before a pair of appearances aimed at restoring his lead in critical battleground states. In both North Carolina and Virginia, where McCain was to speak later in the day, his campaign has surrendered its lead to Obama in various polls. President Bush, a Republican, won both states in 2004.

The state dips mimic larger national trends that have given Obama a lead over McCain following Wall Street chaos that focused the race on who is best equipped to restore the economy.

On Sunday, McCain was to travel to Ohio, where he might appear with “Joe the Plumber,” the Holland, Ohio, plumber Joe Wurzelbacher whom the senator has been portraying as emblematic of people with concerns about Obama’s tax plans.

Obama hasn’t answered too many of these charges directly, letting his TV ads do that work, and has set out on a a new course telling voters that McCain plans to cut Medicare coverage for seniors:

The allegations on both sides will continue flying right up to the end. Probably like 4 or 5 more “October surprises” as well.