Bush Tax Cuts:

When it comes to the issue of taxes, Democratic candidate Barack Obama begins with a plan to roll back the Bush tax cuts for those with incomes above $250,000, according to his campaign Web site.  The Wall Street Journal reported that Obama has called for raising the top ordinary income-tax rate from 35% to 39.6%, the level it was at in 1990.

Obama pledges to make President Bush’s 2001 and 2003 income-tax cuts permanent for about 94% of the population, which applies to those with incomes less than $200,000.

See candidates' tax plan comparison chart at the bottom.

Tax Changes: 

If elected, the candidate plans to implement new tax cuts, including a yearly tax credit for all workers who pay Social Security taxes of $500 per individual ($1,000 for married couples). 

His plan calls for tax credits and refunds, but not an actual reduction in income tax rates.  Some of these individual tax credits, according to the Wall Street Journal, would disappear for an individual as his or her income went up.

Obama also will begin a tax exemption for those who are 65 and older and earning less than $50,000 a year.

The senator would also increase the dependent-care tax-credit rate to 50% and make it refundable, under his plan.

Obama’s tax cuts are expected to cost $280 million a year over the next 10 years, according to his campaign Web site.

In an effort to restore fiscal discipline to Washington, Obama would be implementing a “pay-as-you-go” budgeting policy that requires new spending or tax cuts to be funded by cuts to other programs or new revenue. He is also against raising the federal debt limit.

The candidate plans to let Bush’s tax cuts on dividends and income on capital gains expire by the end of 2010, which would raise the rate from 15% to 20%, according to a Dow Jones report. He plans to eliminate capital gains on start-ups and small businesses, however.

Like Republican candidate John McCain, Obama says wants to reduce the Estate Tax and the Alternative Minimum tax, but to a lesser degree.  His tax plan would extend and index the 2007 AMT patch.

Obama also plans to enforce a “windfall profits tax” on oil companies.  He would also eliminate oil industry tax breaks.

Obama wants to eliminate loopholes in the corporate tax system to create an even playing field and would leave the corporate tax rate at 35%.  He also plans to reform international tax loopholes.  

See Obama: On Energy for more information on the windfall profits tax

Tax Reform:

Obama's tax plan includes an option for taxpayers who file simple returns to submit tax forms that are filled out for them that they only need to sign.

Source: Candidate Web Sites / WSJ