Demand vs. Supply
Trickle Up vs. Trickle Down
Democrats vs. Republicans

What are the basic philosophies behind the tax plans of McCain and Obama or Democrats and Republicans in general? It really helps to understand the basic philosophy and economic approach of each candidate, which does reflect, for the most part the philosophy of their respective parties.

Republicans:
Republicans believe in supply side economics, trickle down. Companies and investors provide the jobs and drive the economy. The more money they are allowed to keep, or receive; the more that will trickle down to the working class in the form of jobs, a stronger economy, and security for workers. Thus the tax plan will generally lower taxes and increase tax credits and deductions for companies and investors.
Investment income should have a lower tax rate or no income tax at all. Investment income includes interest, dividends, capital gains, etc. The individuals that invest the most are in the upper income brackets, and the tax rate should be reduced for them, even if the income is from wages and salaries, so they have more capital to invest. The republican national committee has recommended there be no tax on investment (unearned) income.

Democrats:
Democrats believe in the Demand Side, Trickle Up approach. Consumers consuming and buying, drive the market and the economy, and creates jobs. Thus there should be lower tax rates for the working middle class, and even a rebate as part of a stimulus package. Corporations and investors will get their money as their products and services are sold and the companies’ profits are improved. To meet the demand companies will have to produce more, hire more workers, and invest in more capital goods to expand.

While these seem to be the basic economic philosophies of the two parties, there are other under lying attitudes and judgments they hold. These are voiced by people I know on the extreme right and left, along with very liberal and conservative talk shows.
WARNING: These comments may be offensive, embarrassing, and possibly not true, but are reflective of the mindset of some conservatives and liberals. They also are a backdrop for some tax policies.


From the conservative side:
Wealth is a measure of success. This is the American dream, which should be rewarded not punished.
Those who are the brightest, most productive and innovative will be discouraged from achieving if a graduated income tax system is in place.
Corporations do not pay tax, but just pass them along to the consumer, as part of the price of the product or service.
Every able bodied person should be working. Jobs allow individuals to be self sufficient. Many people on welfare and other entitlements are free loaders, and should be forced to work.
Providing assistance to companies and investors will benefit all, in the form of additional jobs, higher profits, security and enhanced value of retirement funds.

From the liberal side:
Too many companies receive corporate welfare from the government, such as the large oil companies.
Wealth corrupts. Many individuals are wealthy because they inherited the money. They are arrogant, self centered, and condescending.
Giving more money to the investor class and corporations will only tend to shift wealth from the poor and middle class to the upper class, causing a greater disparity between rich and poor, with fewer Americans in the middle class.
Large amounts of wealth should not be allowed to reside in a family generation after generation, but should be redistributed to the population, and only the government can do this effectively.
All individuals are created equal and deserve and are entitled to the basics of life, such as food, shelter, education, clothing, and medical care. While charitable organizations are good, the responsibility is that of the greater community, and only the government can fulfill this obligation.
Large corporations and investors are greedy, and only seek to increase their wealth at the expense of the poor and less wealthy. They are currently using the federal government to accomplish this transfer through tax breaks, grants, tax loopholes, subsidies, earmarks, lack of government regulation, large government contracts to provide services and products at bloated prices, etc.

In the next article I will compare the tax proposals of McCain and Obama. You will see the supply side and demand side at work.