Transcripts

"Economic Choices 2008"-The Great Tax Divide

PAUL KANGAS: You've heard presidential hopefuls Barack Obama and John McCain talking about changing Washington. But what does that change mean for your bottom line? A new analysis by the Tax Policy Center shows there's a big difference, depending on how much money you make. Darren Gersh explains as we continue our "Economic Choices '08" coverage.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: On taxes, you can call John McCain Mr. 10 percent. Mr. 7 percent would be Barack Obama. That's how much each man wants to cut Federal income tax revenues over the next 10 years. The Tax Policy Center's Len Burman crunched the numbers and says, while there are big differences between the two candidates, they both embrace deficit-spending.

LEN BURMAN, DIRECTOR, TAX POLICY CENTER: Senator Obama's plan is $2.7 trillion of tax cuts. It would add about $3.5 trillion to the debt over the next 10 years, when you add in the interest cost. Senator McCain's plan, $3.7 trillion in tax cuts and it would add about $4.5 trillion to the debt.

GERSH: You can see the real dividing line between Obama and McCain when you consider who gains and who loses under their plans. Consider the very wealthiest Americans, those with a pre-tax income of close to $3 million. The Tax Policy Center estimates Senator Obama would raise their taxes by more than $700,000. Senator McCain would cut taxes in that bracket by almost $270,000. What if you're in the middle, making between $37,000 and $66,000? Obama wants to cut your taxes by about $1,000, Senator McCain by around $300. Burman cautions the tax cuts are being promised just as the Federal budget is straining to support the retirement of the baby boom generation.

BURMAN: You know, if you borrow the money to pay for tax cuts and you end up having to pay it back with interest in the future, you could end up with much higher tax rates than we've ever experienced.

GERSH: There's more detail on the Obama and McCain plans and what they might mean for your bottom line on the NBR web site on pbs.org. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.