So yesterday I said I’d do some reading to be able to provide a more nuanced look at John McCain’s economic proposals, which considering tonight’s final debate ostensibly focuses on the economy, should be quite germane to your political curiosity. Here are McCain’s proposals:
· SENIORS: Lower Taxes On Seniors Tapping Their Retirement Accounts.
· SENIORS: Suspend Tax Rules That Force Seniors To Sell Their Stocks In The Midst Of This Financial Crisis.
· SAVERS: Accelerate The Tax Write-Off For Those Forced To Sell At A Loss In The Current Market.
· SAVERS: Reduce Capital Gains Taxes For 2009 And 2010 To Raise The Incentive To Save And Invest.
· HOMEOWNERS: Purchase Mortgages Directly From Homeowners And Mortgage Servicers, And Replace Them With Manageable, Fixed-Rate Mortgages.
· WORKERS: Eliminate Taxes On Unemployment Benefits.
As a quick glance over the terminology reveals, as you might expect, that tax cuts comprise virtually every aspect of the proposal. The McCain Resurgence Plan (“Homeowners”) is the one non-tax cutting element proposed, and as previously noted, it’s a horrible idea to pay inflated prices to the mortgage originators who generated this mess. With that out of the way, how about the rest of the proposals?
There’s a lot here, so I’ve put it below the break.
1.) Lower Taxes on Seniors Tapping Their Retirement Accounts
This proposal would allow those seniors who have retirement accounts (of which a majority of American’s don’t) to withdraw money from retirement accounts (401(k)s, etc.) at a temporary rate of 10 percent. But of course, since most Americans don’t have retirement accounts, this wouldn’t help the people who need it the most. Now, lest you think I’m about to turn bleeding-heart, it’s a fairly common sense proposition. The consumption of people who don’t need the help won’t change much on the day-to-day during periods of economic duress. For those people people who do need the help, their consumption will drop sharply, and the less money is in the economy, the worse for everybody. Incidentally, this is why measures such as temporarily increasing the supply of food stamps is such effective stimulus.
Now, let’s say you were really wealthy and had a lot of money invested in the stock market, and you knew that you could take out retirement money at a significantly reduced tax rate but only for a limited window. What would you do? You’re damn right you’d pull all that money out, that shit is on sale! In all, poor stimulus, huge de facto tax cut for the wealthy.
2.) Suspend Tax Rules That Force Seniors To Sell Their Stocks In The Midst Of This Financial Crisis.
This measure is reference to a law that forces those over 70 to withdraw a certain amount from their savings accounts. The theory, according to McCain, provides that with stock prices so low, seniors shouldn’t be forced to take a “haircut.” What McCain doesn’t point out is that the law stipulates that only 4 percent be withdrawn, so unless your savings accounts are entirely comprised of stocks — which most funds automatically shift away from for purposes of stability — this measure will literally do nothing.
3.) Accelerate The Tax Write-Off For Those Forced To Sell At A Loss In The Current Market.
As far as I can tell, this seems like not a particularly pernicious policy, but a pretty useless one. From The New Republic:
The provision for expanded write-offs is worth up to $4,200 to investors with incomes above about $400,000.
So again, another proposal that won’t provide any meaningful stimulus whatsoever, but does manage to alleviate the tax burden of the most wealthy.
4.) Reduce Capital Gains Taxes For 2009 And 2010 To Raise The Incentive To Save And Invest.
Well, to begin addressing this one, the first thing you should know is that according to analysis by the non-partisan Tax Policy Center, the reduction of the Capitals Gains tax to 7.5 percent would concentrate two-thirds of its benefit among those making over $1,000,000 and have a whopping benefit of absolutely zero to those making less than $50,000. In fact, this measure would not even positively affect after tax income unless you made over $100,000, at which point you would be blessed with a 0.2 percent rise in real income. As with the retirement account tax cut, this would serve only to benefit the most wealthy, which far from a moral issue, is simply a horribly inefficient method of economic stimulus.
5.) Purchase Mortgages Directly From Homeowners And Mortgage Servicers, And Replace Them With Manageable, Fixed-Rate Mortgages.
6.) Eliminate Taxes On Unemployment Benefits.
This is probably the only proposal that would tangibly benefit those who need help. That said, it’s of questionable moral hazard, and that money could be better spent in infrastructure development.
So how is it on the whole? Well, by my count there’s one proposal that would benefit those who need help, 4 that prove ineffective stimulus by benefiting only the wealthy, and 1 that is a horribly inefficient and morally hazardous way of addressing the housing the issue. Not so good.