Tuesday, October 21st, 2014

Sorting out the truth on taxes

SUMMARY: Between now and Election Day, we plan to focus on key issues of the presidential election. We'll distill the candidates' positions and examine key rulings. First up: taxes.

For the next six weeks, we'll examine issues from the presidential campaign. For each topic, we’ll distill the candidates' positions and present some of key rulings. This week, we start with taxes. A ripe subject area, given its propensity for distortion and attack. Read all our rulings on taxes here.

The candidates' plans

The Bush tax cuts are set to expire during the next president's term, and each candidate has a different way of addressing that, along with other proposals.

John McCain

• Keep the Bush tax cuts in place for all income levels.

• Expand the tax exemption for dependants (often children), eventually doubling it to $7,000 per dependant.

• Reduce the maximum corporate tax rates from 35 percent to 25 percent.

Barack Obama

• Roll back the Bush tax cuts for those making $200,000 or more. Leave others as is.

• Give each worker a $500 credit ($1,000 for couples) to offset payroll taxes.

• Eliminate income taxes for seniors making less than $50,000 per year.

• Allow non-itemizers to deduct mortgage interest.

• Increase payroll taxes for workers making more than $200,000.

Analysis : The nonpartisan Tax Policy Center said McCain's plan could grow the economy by cutting taxes for corporations and the wealthy, but it also would increase the budget deficit. The center said Obama's plan will encourage more low-income people to join the workforce. But it questions his plans to help seniors and homeowners, two groups already favored under the tax code. For more information, visit the center's Web site.

Key rulings for McCain

• On the Bush tax cuts: We put this issue to our Flip-O-Meter and found an actual change of position for McCain. He was one of the few Republicans who opposed tax cuts proposed by President George W. Bush in 2001, and he opposed them again when they came up for renewal in 2003. When they came up for renewal again in 2006, though, he voted in favor of them, citing a need for a stable tax policy. We rule this one a Full Flop.

• On Obama's tax plan: In a Web ad, McCain says Obama's tax plan includes "a tax increase for everyone earning more than $42,000 a year." This claim stems from a budget resolution Obama supported earlier this year. But voting for a budget resolution is quite different from voting for a tax increase. And the ad seems designed to make the average viewer think that Obama wants to raise taxes on people making that amount, which isn't true. We rate McCain's claim False.

Key rulings for Obama

• On McCain's tax breaks: In a television ad, Obama says that McCain offers "billions in tax breaks for oil and drug companies, but almost nothing for families like yours." McCain's tax cuts for oil and drug companies, though, are part of an across-the-board reduction of corporate taxes that McCain says will make the United States more competitive with countries around the world. And McCain proposes increasing the tax exemption for dependents (usually children) from $3,500 to $7,000. So he does offer some tax cuts for families that include children or other dependents. We rate this statement Barely True.

• On his tax plan: In a speech this week, Obama said, "I will cut taxes — cut taxes — for 95 percent of all working families." The linchpin here is Obama's tax credit for workers, which is intended to offset payroll taxes. Single people can qualify for a $500 credit; married couples filing together could get $1,000. We consulted the nonpartisan Tax Policy Center, which has created detailed models for how each candidate's tax proposal would affect American taxpayers. Its analysis says that under Obama's plan: 95 percent of all tax filers (working and non-working) will get a cut in their individual income taxes and 95 percent of all families with children (working and non-working) will get a cut in their total federal taxes. We rule this statement True.