Business

Historically speaking, personal income taxes haven't been around that long domestically. Uncle Sam used personal income taxes to support Union troops during the Civil War, but it wasn't until the Sixteenth Amendment was ratified in 1913 that they were made a permanent part of the landscape. At the time, the income tax was praised by its supporters because it only applied to the exceptionally wealthy, thus forcing the Rockefellers and Vanderbilts to pay while showing mercy to the middle class.

Now people know that the only things for sure in life are death and taxes — a topic at the forefront of the presidential race. The fiscal policy differences between presidential candidates are extraordinary, but what are the facts?

According to a summary by the independent Tax Policy Center, "Sen. John McCain would permanently extend the 2001 and 2003 tax cuts, increase deductions for taxpayers supporting dependents, reduce the corporate income tax rate, and allow immediate deductions for the cost of certain short-lived capital equipment. Sen. Barack Obama would permanently extend certain provisions of the 2001 and 2003 tax cuts primarily affecting taxpayers with incomes under $250,000; increase the maximum rate on capital gains and qualified dividends; and enact new and expanded targeted tax breaks for workers, retirees, homeowners, savers, students, and new farmers."

The report concludes that McCain's plan is regressive in that it gives the largest tax cuts to high-income taxpayers, and Obama's plan is progressive in that it directs the largest cuts toward lower and middle income taxpayers.

From an investment perspective, there are concrete differences. McCain's proposal would temporarily cut dividend and capital gains tax rates from 15 to 7.5 percent. On the other hand, Obama would return the maximum capital gains rate for married couples earning $250,000 and up to pre-2003 levels of 20 percent. In reality, these differences wouldn't impact every household since most dividends and capital gains are received by high-income families. For instance, in 2000, families with incomes over $200,000 received 47 percent of all dividends and those with incomes above $100,000 received 72 percent.

Healthcare is also a major pocket-book difference between the candidates. Obama proposes making health insurance more affordable to those with existing policies and providing income-related federal tax subsidies for all others to purchase coverage. His proposal would require employers to provide health insurance and would offer small business a 50 percent healthcare tax credit to offset the cost of employer paid premiums. At the other end of the spectrum, McCain would tax employer provided health insurance to employees for the first time. He would instead offer a refundable tax credit of $2,500 for individuals and $5,000 for families who buy qualifying health coverage.

The candidates also offer some new tax solutions. McCain would phase in greater dependency exemptions and would drop the maximum corporate income tax rate down from 35 to 25 percent. The corporate income tax, as a source of federal revenue, has been in decline since World War II, falling from 30 percent of tax revenues in 1946 to 10 percent by 2005. McCain's speeches point out European countries that've been slashing corporate income tax rates to attract U.S. investors. Ireland's rate is roughly 12 percent, 27 for Portugal, 25 for Austria, and 31 percent in the Netherlands.

Obama's plan offers work incentives in the form of a Making Work Pay Credit and an expanded Earned Income Tax Credit. He proposes eliminating income taxes for seniors making less than $50,000 annually and expanding the college education credit. He also encourages saving by making the existing saver's credit refundable and mandating automatic 401(k)s.

While it is wonderful that the candidates have tax recommendations, it will actually boil down to Congress to put these ideas in action. For a full analysis, visit the Tax Policy Center at http://www.taxpolicycenter.org.