IRET Policy Bulletin V. 92

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92 IRET Policy Bulletin 1 (2008)

handle is hein.taxfoundation/iretpbul0051 and id is 1 raw text is: October 20, 2008
No. 92

S. -

THE CANDIDATES' TAX PROPOSALS: THEIR IMPACT
ON TAXPAYERS AND THE ECONOMY
Introduction and summary
Taxes are an important issue in this year's Presidential contest. Senators John McCain and
Barack Obama have sharply different visions of how taxes affect economic activity and what
modifications to the current system should be made.
Senator McCain's tax plan focuses mainly on enhancing economic growth and job creation by
reducing marginal tax rates on labor and capital income and by improving economic efficiency. It
would increase capital formation and raise pre-tax incomes across the board. The income gains
would raise after-tax incomes for people of all income levels, even for those not benefitting directly
from the Senator's tax reductions.
Chart 1 Estimated Changes in Capital,
Labor, And Output From The Tax Proposals
Of Senator's McCain And Obama

10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%

7.3%

E Obama ED McCain

2.7%

- t.0%

-3.5%

Capital Stock

Labor Supply

Output

Source: Authors' calculations, using model described in text.

Institute for
Research
on the
Economics of
Taxation

IRET is a non-profit, tax exempt 501(c)3 economic policy research and educational
organization devoted to informing the public about policies that will promote
economic growth and efficient operation of the market economy.
1710 Rhode Island Avenue, N.W., 11th Floor * Washington, D.C. 20036
(202) 463-1400 * Fax (202) 463-6199 o Internet www.iret.org