Some of the most substantial deductions in the federal tax code are the itemized deductions for state and local income, sales, and real estate taxes. This map shows the variation, by county, in the amounts of...
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Obama and McCain Tax Proposals Raise Marginal Tax Rates for Many Middle-Income Taxpayers
Marginal tax rates will rise to over 50 percent on some middle-income families if Sen. Obama's tax plan becomes law, and over 40 percent under Senator McCain's plan, according to a new report from the Tax Foundation.
The report is Tax Foundation Fiscal Fact No. 150, "How Do the Presidential Candidates' Tax Plans Affect Taxpayers' Marginal Tax Rates?" by Robert Carroll, Ph.D., vice president for economic policy at the foundation. Carroll illustrates his point with a family of four—two working adults with two children—and explains the economic importance of "marginal" tax rates and why they can differ dramatically from statutory tax rates. Carroll explained:
Senator Obama's new and expanded tax credits for low-income taxpayers will certainly cut taxes for low-income people, but the credits are mostly recaptured from middle-income taxpayers. During this phase-out range, marginal tax rates shoot up, causing economically damaging side effects. As a result, for example, a family of four in the $30,000-to-$43,000 range would discover that for every additional dollar they earn, they pay more than 50 cents in income tax.
Read the new Tax Foundation Fiscal Fact. Click here for more analysis of the presidential candidates' tax plans, and here to compare specific provisions of the tax plans of McCain, Obama, Bob Barr (Libertarian Party), Chuck Baldwin (Constitution Party), Cynthia McKinney (Green Party), and Ralph Nader (independent).
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The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.