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A Pox on All the Candidates' Houses, But the Largest Pox on McCain's

John Berry is--rightfully--unhappy: >April 21 (Bloomberg) -- The three major presidential candidates, ignoring the tenuous outlook for federal finances, are making foolish, untenable promises not to raise taxes... are pretending the next president isn't going to have to make some politically painful choices about cutting popular programs, raising taxes or, most likely, both.... "Under any plausible scenario, the federal budget is on an unsustainable path -- that is, federal debt will grow much faster than the economy over the long run," CBO said in December in its most-recent assessment of the long-term budget outlook. That's the elephant in the room the candidates are ignoring, just as President George W. Bush has done year after year. >McCain's pledges are the more egregious because he wants major tax reductions in addition to extension of all the expiring cuts enacted during Bush's two terms. McCain is offering one really good idea: elimination of the alternative minimum tax, or AMT, though without saying how he would offset the revenue loss. He also wants to double the personal exemption from $3,500 to $7,000, cut the corporate income-tax rate to 25 percent from 35 percent and allow immediate expensing of business investment in new equipment.... McCain's proposals, which would lead to a big increase in debt service due to larger budget deficits, make that [fiscal] future worse by many trillions of dollars. His ideas for offsetting spending cuts are trivial in comparison, though he nevertheless also promises to balance the budget.... >[B]udget experts say his numbers don't add up, and they are right.... >The Democratic candidates, Clinton and Obama, didn't go that far in their April 16 debate in Philadelphia. Rather, they promised not to raise taxes on the middle class. That group was absurdly defined by Clinton as households with incomes of less than $250,000. Obama put the upper limit at between $200,000 and $250,000.... [T]here were 4.1 million income tax returns filed in 2006 with adjusted gross incomes of $200,000 or more. That was just over 3 percent.... Increasing tax rates for upper-bracket taxpayers won't raise a lot of revenue. The 2006 IRS tax data attributed about half of that year's total $1.07 trillion income-tax liability to taxpayers with $200,000 or more in adjusted gross income. The increase in payments from reimposing the higher tax rates probably would yield initially only an additional $60 billion or $70 billion annually. Clinton and Obama also have proposed new tax cuts that would reduce revenue by more than that each year.... >At the same time the two Democrats are promising no tax increases for all but a handful of Americans, they also want to establish some type of universal health insurance that would add significantly to federal spending.... >Of course, maybe being honest about the future is no way to get elected, and that's really sad. One quibble: eliminating the AMT with a plan to offset the revenue loss is a good idea. Eliminating the AMT with no such plan is an act of utter stupidity. John McCain's AMT plan falls into the second, not the first category.

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