With the Presidential debates in full swing, Americans are getting a clearer picture of the candidates and their platforms. With the economy still struggling and unemployment rates still high, one issue on most voters' minds is which presidential candidate will be the most tax-friendly to members of the middle class.
Before exploring both President Obama and Governor Romney's tax proposals, it's important to understand the individual income tax rates in place today. Currently, there are six different income tax rates in place depending on your income:
The tax rates are in place through 2012 as a result of the Tax Relief Act of 2010. Taxes for all income brackets are set to raise in 2013 if no new legislation is passed. On December 31, 2012, the 10 percent rate will be dissolved completely, with the remaining tax rates 15, 28, 31, 36, and 39.6.
Barack Obama's income tax proposal, if reelected, will remain largely unchanged to the current tax rates in place. The only proposed tax increases are for the highest two income brackets—the 33 percent taxable bracket will increase to 36 percent, and the 35 percent taxable bracket will increase to 39.6 percent. The top rate will apply to adjusted gross incomes of $200,000 for individuals and $250,000 for families. Obama has also suggested lower rates for those in lower and middle income brackets, although specifics are currently unknown.
If elected, Mitt Romney has proposed to extend the rates in place now when they expire in 2013. He has also proposed over the long term a 20 percent reduction of each of the current six rates, making the new tax rates 8 percent, 10 percent, 20 percent, 22.4 percent, 26.4 percent, and 28 percent.
Taxpayers, particularly those with dependent children, have benefited from a number of tax credits set to expire in 2012. These include the $1,000 child tax credit, adoption credit, and child and dependent care credit.
Both President Obama and Governor Romney have proposed to make the $1,000 child tax credit permanent as well as extend other Bush-era tax cuts.
The bottom line is, some people believe Obama is more tax-friendly to the middle class, and some believe Romney is. Most people base their belief on the following philosophies:
Ultimately, determining which candidate is more tax-friendly to the middle class requires a great deal of independent research on each candidate. Before you vote, take a look at each candidate, his track record, his history of raising or lowering taxes, and the viability and long-term effects of their proposed tax plans. It may be difficult to find unbiased information, but seeking to understand each candidate’s income tax proposals will help you make a more informed decision in November.