Barak Obama Will Cut Taxes More than John McCain for 95.7% of Bangor Residents
John McCain and Barak Obama have both proposed tax plans that will cut income taxes for most Americans. The Tax Policy Institute has a very comprehensive analysis of the candidate’s plans, as well as some very informative projections available on its website. In this analysis I focus on the implications of each candidate’s plans for the working families of Bangor, ME.
Data from the U.S. Census Bureau’s American Community Survey of 2007 gives us a fairly detailed picture of the breakdown of household incomes in the Bangor, ME metropolitan statistical area (MSA). We see that, like much of the country, the vast majority of Bangor residents earn incomes of less than $200,000 per year. Nearly 50% of households in the Bangor MSA have annual incomes between $25,000 and $75,000, while 2.2% earn more than $200,000 per year.
(Click on chart for larger view)
For the data table behind the chart, click here.
There has been a lot of talk about tax relief for working Americans; just how much relief depends on your definition of “working Americans.”
- All families earning $200,000 or less will see a tax cut.
- Many families (especially dual income families) earning less than $250,000 will see a tax cut.
- Wealthier families will see their taxes go up under Obama’s plan. This is largely due to rolling back the 2001 and 2003 tax cuts enacted under the Bush administration that reduced the top marginal tax bracket from 39.6% to 35%. In 2008, the top tax bracket begins at $357,700.
- Would reduce tax receipts by an estimated $2.9 trillion
- Tax breaks for most families making between $100,000 and $200,000 per year.
- Tax breaks for many families making less than $100,000 per year, though childless couples making less than $75,000 per year will see no tax cut.
- No tax breaks for most families earning less than $25,000 per year
- Make permanent the 2001/2003 reduction in the top marginal tax bracket resulting in large tax cuts for those making more than $357,700.
- Reduces overall tax receipts by $4.6 trillion.
Comparing the Obama and McCain Plan
Let’s look at a few examples:
Family A – Married, two children, two income earners making $100,000
- Obama’s Plan – would reduce their tax burden by $3,583
- McCain’s Plan – would reduce their tax burden by $2,759
- Advantage – Obama by $258
Family B – Married, no children, two income earners making $75,000
- Obama’s Plan – would reduce their tax burden by $1,049
- McCain’s Plan – would see no tax cut
- Advantage – Obama by $1,049
Family C – Married, two children, one income earner making $200,000
- Obama’s Plan – would reduce their tax burden by $6747
- McCain’s Plan – would reduce their tax burden by $6747
- Advantage – Tie
Family D – Married, two children, two income earners making $50,000
- Obama’s Plan – would reduce their tax burden by $1,004
- McCain’s Plan – would reduce their tax burden by $721
- Advantage – Obama by $283
Family E – Married, three children, two income earners making $2,000,000
- Obama’s Plan – would increase their tax burden by $109,544
- McCain’s Plan – would reduce their tax burden by $1,682
- Advantage – McCain by $111,226
Who Benefits from Each Plan in Bangor?
Most families making between $35,000 and $200,000 will see a tax but under either candidate’s plan. Few making less than $35,000 a year will see a tax cut under McCain’s plan, while nearly all of those families will see a cut under Obama’s.
Obama’s tax plan will cut taxes more than McCain’s for nearly all families making less than $150,000 per year and many families making less than $200,000 per year. On the other hand, McCain will cut taxes for those making more than $1,500,000 per year while Obama will raise taxes by roughly 1-5% of gross income for those making more than $250,000 per year with those making more than $2,000,000 per year seeing the biggest increase. A large portion of these increase is simply due to rolling back the Bush administration tax cuts of 2001 and 2003 that reduced the highest marginal tax rate.
The Tax Policy Center summarized the impact of the McCain and Obama tax plans as follows:
The two candidates’ tax plans would have sharply different distributional effects. Senator McCain’s tax cuts would primarily benefit those with very high incomes, almost all of whom would receive large tax cuts that would, on average, raise their after-tax incomes by more than twice the average for all households. Many fewer households at the bottom of the income distribution would get tax cuts and those tax cuts would be small as a share of after-tax income. In marked contrast, Senator Obama offers much larger tax breaks to low- and middle-income taxpayers and would increase taxes on high-income taxpayers. The largest tax cuts, as a share of income, would go to those at the bottom of the income distribution, while taxpayers with the highest income would see their taxes rise significantly.
Putting it all Together for Bangor
The good news is that 97.8% of the households in the Bangor metropolitan area would see a tax cut under either candidate’s plan. For nearly all of the 95.7% of households earning less than $150,000 per year, Barak Obama’s plan will cut their taxes more than John McCain’s. For those households making more than $250,000 a year, Barak Obama’s plan will increase your taxes by 1-5% of gross income. McCain’s plan will leave the tax burden of those making between $200,000 and $1,000,000 largely unchanged while those earning more than $1,000,000 will likely see additional tax cuts.
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