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How the economy would respond to the candidates tax plans

Employment

McCain
+2.13M
Obama
+.92M

Gross Domestic Product

McCain
+283.7B
Obama
+101.7B

Annual Employment Change

McCain
+3.4M
Obama
+1.5M

A recent Heritage Foundation Center for Data Analysis report1 describes the economic outcomes that can be expected based on the presidential candidates’ proposed tax plans. The outcomes include the effects of these proposed policies on gross domestic product, disposable income, and employment growth over a 10-year period.

The analysis finds that job growth under Senator John McCain’s plan at the national level is more than two times faster than job growth under Senator Barack Obama’s plan. Table 1 (scroll down) shows
the average yearly employment gain that can be expected in each state as a result of McCain’s and Obama’s tax plans.2 Job creation grows faster in McCain’s plan because of the plan’s pro-growth provisions.

The McCain proposal includes lower tax rates for businesses and allows businesses to deduct the cost of new purchases of equipment and technology in the first year. Both of these proposals lower business expenses, leaving more money for business owners
to use for employment and operation purposes. Owners will use this money to hire new staff, purchase more materials, and invest more in research and development activities. Obama’s plan relies chiefly on a series of tax credits in order to redistribute income.

The Center for Data Analysis used a version of the GlobalInsight (GI) baseline forecast and the U.S. Macroeconomic Model to simulate the economic effects of adopting the McCain and Obama tax proposals. This model is provided to The Heritage Foundation by IHS Global Insight, Inc., of Lexington, Massachusetts. The methodologies, assumptions, conclusions, and opinions in this CDA Report are entirely the work of CD A analysts. They have not been endorsed by and do not necessarily reflect the views of the owners of the GI model. The GI model is used by leading government agencies and Fortune 500 companies to provide indications
to policymakers of the probable effects of economic events and public policy changes on hundreds of major economic indicators. State estimates were calculated by multiplying each state’s share of total national employment to the macroeconomic estimates of each of the tax plans.

Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an attempt to aid or hinder the passage of any bill before Congress.