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The Tax Issue is the Key to a McCain Victory

The opinions expressed by columnists are their own and do not necessarily represent the views of

Now that Congress has approved the Bush-Paulson financial stabilization plan, Senator John McCain has an opportunity to refocus his Presidential campaign, and get back on the political offensive by pounding Senator Obama on the tax issue.


No domestic issue provides a starker contrast between Mr. McCain and Mr. Obama than the issue of taxes. McCain wants to keep taxes low for all taxpayers, and cut them where he can. Mr. Obama wants to redistribute the tax burden by raising tax rates on the economically successful, and providing tax relief to certain middle- and low-income earners.

Specifically, Senator McCain wants to permanently extend the 2001-2003 tax reductions, increase dependent tax exemptions, cut the U.S. corporate tax from 35 percent to 25 percent, allow businesses to expense their investments, and phase-out the Alternative Minimum Tax. Ultimately, Mr. McCain wants to simplify the tax code by allowing taxpayers to choose between the current system or a streamlined system with two income tax brackets and a generous standard deduction.

By contrast, Senator Obama has proposed a redistributionist tax plan, which would generally raise income and payroll taxes on the so-called “wealthy,” and use that extra tax revenue to provide a hodge-podge of tax breaks for middle- and lower-income taxpayers. Obama’s tax-raising agenda includes increasing the top tax rate to 39.6 percent, raising capital gains and dividend taxes somewhere between 20 percent and 28 percent, and imposing a 2 to 4 percent payroll tax surcharge on people earning $250,000 or more.


Further, Senator Obama’s voting record clearly demonstrates his bias toward higher taxes. During just three years in the U.S. Senate, Obama voted 94 times for higher taxes, and voted for a Congressional budget resolution which called for raising taxes on people earning as low as $42,000 annually.

Because of tightening credit, rising energy prices, and the continuing fall-out from the housing bubble, the U.S. economy is clearly slowing down, perhaps sliding into a recession. As a result, jobless claims are up, consumer spending has slowed from the second quarter to the beginning of the third quarter, and corporate after-tax profits and capital expenditures are anemic. Over the past ten months through September, the economy has lost 983,000 jobs while unemployment has increased from 5.0 to 6.1 percent.

Even the most extreme liberal Keynesian economists would not propose increasing taxes in a recession. Barack Obama now says he would consider delaying the tax rate hikes on the rich if the economy is in recession. But if the budget deficit worsens, Mr. Obama will be under tremendous political pressure by liberal interest groups to raise taxes to pay for social government spending programs. If forced to choose between raising tax rates on the rich or increasing funding for Head Start or government health insurance for children, is there any doubt what President Obama would do, even if there was a recession?


In a recent Wall Street Journal op-ed, former Bush advisor Karl Rove wrote: “Taxes still matter because they are highly visible and unpopular. In a July 2008 Pew Poll, 52% of Americans said it was ‘difficult to afford’ taxes. And in times of economic challenge, concern about taxes rises—especially among blue-collar households skeptical of promises that that tax increases won’t affect them.” Mr. Rove concludes: “The tax issue has lost its political punch in the eyes of some commentators, but not among voters.”

Apparently, not many among Democrat politicians either. Recently, Senator Bernie Sanders, Independent from Vermont and an avowed socialist, proposed an amendment to the Paulson financial rescue plan calling for a 10 percent surtax on wealthy individuals earning more than $500,000 annually to help finance the cost of the plan. Interestingly, the amendment was defeated on a “voice vote” because Democratic Senators feared going on the record in favor of higher taxes only weeks before an election.

Clearly, Democrats remain politically vulnerable on taxes. During the recent Vice Presidential debate, Alaska Governor Sarah Palin relentlessly attacked Mr. Biden and Mr. Obama for proposing higher taxes:

“Now, Barack Obama and Senator Biden also voted for the largest tax increases in U.S. history. Barack had 94 opportunities to side on the people's side and reduce taxes and 94 times he voted to increase taxes or not support a tax reduction, 94 times. Now, that's not what we need to create jobs and really bolster and heat up our economy. We do need the private sector to be able to keep more of what we earn and produce. Government is going to have to learn to be more efficient and live with less if that's what it takes to reign in the government growth that we've seen today. But we do need tax relief and Barack Obama even supported increasing taxes as late as last year for those families making only $42,000 a year. That's a lot of middle-income average American families to increase taxes on them. I think that is the way to kill jobs and to continue to harm our economy.”


Senator McCain needs to pick up where his running mate left off by repeatedly explaining his pro-growth tax cuts, and relentlessly pounding Barack Obama for wanting to raise taxes, from now until Election Day.

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