If you're looking for a simple guide to gauge what's happening tomorrow night, keep your eyes on Ohio and Pennsylvania. Polls close in Ohio at 7:30. No candidate has won the Presidency without Ohio since John Kennedy did it in 1960. Pennsylvania's polls close at 8PM. If John McCain loses Pennsylvania, he would have to win virtually every other battleground state to have a chance, most of which he's behind in, at least according to the polls. If McCain loses Pennsylvania and Ohio, The Obama people can start measuring for the drapes in the Oval Office.
But this is an important point to make. Polls are supposed to be a snapshot of voter preference the day they're taken, not predictive of the future. The final polls were taken over the weekend, and most do show a tightening race. Let's put it this way: neither campaign is taking their foot off the accelerator in the final hours.
Nothing separates the two candidates more dramatically than their tax and spending plans. And while the current financial crisis may end up forcing the winner to alter his best intentions, whom we elect will set the country on an economic course distinct from his opponent's. I'm not going to characterize those courses with labels; the campaigns themselves are doing enough of that. But here are the plans, just one day before Americans render their verdict.
Democrat Barack Obama's tax plan
- Eliminate income taxes for seniors with less than $50,000 in income. Households with less than $250,000 in income would receive tax cuts of up to $1,000 per family.
- Increase the capital-gains tax – a levy on the profits from the sale of an asset – from 15 percent to 20 percent for individuals making more than $200,000 and families earning more than $250,000, while eliminating the tax on proceeds from investments in small businesses and startups.
- Cut the capital-gains tax rate from 15 percent to 7.5 percent for two years.
- Increase the $3,500 personal exemption for dependents in stages until it reaches $7,000 in 2016.
- Allow first-year deductions for equipment and technology investments and establish a permanent tax credit equal to 10 percent of wages spent on research and development.
- Set the estate tax exemption permanently at $5 million and the tax rate at 15 percent. The current rate is 45 percent, and the exemption now stands at $2 million.
Obama's General Economic Plan
- Would enact a windfall profits tax on oil company profits to provide a $1,000 rebate to families, provide $50 billion to jump-start the economy, cut income taxes by $1,000 for "working families" and eliminate income taxes for seniors making less than $50,000 per year
- Will amend NAFTA and pressure the World Trade Organization to stop countries from "continuing unfair government subsidies to foreign exporters and nontariff barriers on U.S. exports"
- Invest in the manufacturing sector to create five million "green" jobs by spending $150 billion over 10 years to advance biofuel, hybrid, and other alternative energy
- Create a national infrastructure reinvestment bank that will provide financing for transportation projects across the nation, creating 2 million direct and indirect jobs
- Will eliminate capital gains taxes on startup and small businesses and supply small businesses with a $500 tax credit for every worker
- Expand the Family and Medical Leave Act to companies with 25 employees and more and encourage states to adopt paid-leave systems
- Create a 10 percent universal mortgage credit to provide an average of $500 to about 10 million homeowners
Republican John McCain's Tax Plan
- Make the Bush tax cuts permanent.
- Cut the capital-gains tax rate from 15 percent to 7.5 percent for two years.
- Cut the corporate tax rate from 35 percent to 25 percent by 2015.
- Increase the $3,500 personal exemption for dependents in stages until it reaches $7,000 in 2016.
- Raise to $15,000 from $3,000 the amount that could be deducted for stock losses in 2008 and 2009.
- Allow first-year deductions for equipment and technology investments and establish a permanent tax credit equal to 10 percent of wages spent on research and development.
- Set the estate tax exemption permanently at $5 million and the tax rate at 15 percent. The current rate is 45 percent, and the exemption now stands at $2 million.
John McCain's General Economic Plan
- Balance the federal budget by 2013 - roughly the end of his first term - with a combination of spending control, a one-year spending freeze in nonessential areas and bipartisan budget proposals
- Will cut the corporate tax rate from 35 to 25 percent and reduce the estate tax rate to 15 percent with a $10 million exemption; also would ban Internet taxes and new cell phone taxes
- Will direct his Treasury secretary to implement a plan that will allow mortgage holders with failing mortgages to renegotiate for a new fixed-rate mortgage, a program that will cost about $300 billion
- Wants a first-year deduction or expensing of equipment and technology investments by businesses
- Will overhaul unemployment insurance to make it a program for retraining, relocating and assisting workers who have lost jobs
- Plans to increase exporting with "multilateral, regional and bilateral efforts to reduce barriers to trade"
- Would create a national commission to modernize labor laws and training programs to "allow for more flexible scheduling arrangements" and "enable workers to more easily transition between jobs"
Finally, it wouldn't be any fun to avoid the prediction game entirely, but I'm certainly not going to take any responsibility for being right or wrong! So let me point you in the direction of a serious academic who just happens to teach at the Wharton School at the University of Pennsylvania. His name is Justin Wolfers, and he's an associate professor of business and public policy. He wrote a column for the Wall Street Journal late last week that's interesting from the point of view of what he calls behavioral economics. It sounds dense, but it's really interesting. Here's the link.
But just remember. If upsets didn't happen, the Phillies wouldn't have won the World Series.
Jim Gardner
