NYT and WaPo on McCain Economics and Holtz-Eakin’s Role

The New York Times and Washington Post had two articles today discussing McCain’s economic policies and his economic staff. First, David Leonhardt wrote a column in the New York Times that focused mostly on McCain’s advisor Douglas Holtz-Eakin, former director of the Congressional Budget Office, who is widely respected in tax policy circles in Washington.

Another McCain article, this one in the Washington Post by Ruth Marcus, looks at “McCainonomics.” Marcus mostly criticizes McCain’s current positions on tax policy, arguing that they are irresponsible.

One correction is necessary in Marcus’s article regarding AMT where she writes: “In fact, getting rid of the AMT — as opposed to patching it to make sure it does not catch increasing numbers of taxpayers — would primarily benefit those with annual incomes of $500,000 or more.”

That is not really true. While an AMT repeal would hit what most people would call rich (200,000 – 500,000), it doesn’t really hit people above $500,000 due to the fact that the AMT rates are much lower than the ordinary rates of 33 and 35 percent that these taxpayers are hit with. The Joint Committee on Taxation estimates that for tax year 2010 (the peak of AMT for the near horizon), under current law, those making above $500,000 in AGI would only pay $15 billion in AMT out of a total AMT payments (plus lost credits) amount of $119.5 billion. Approximately 56 percent of tax returns with AGI above $500,000 would be hit by AMT. The fact of the matter is that the hardest hit group is between $200,000 and $500,000, which would pay an additional tax of $46.8 billion (98.1 percent of tax returns in that group would pay AMT).