With the election a day away, today seems to be the appropriate time to summarize the differences in the candidates’ plans. The main differences are two: first, McCain proposes much larger tax cuts than Obama; and second, Obama’s plan tends to favor low- and middle-income taxpayers while McCain’s plan is more beneficial to those with higher incomes.

Senator McCain would permanently extend all of the income tax cuts enacted by President Bush. Senator Obama extends almost all of the income tax cuts except those that apply to high-income households: he would raise the top two income tax rates, currently 33 and 35 percent, to their Clinton-era levels of 36 and 39.6 percent; restrict the value of exemptions and deductions for high-income households; and raise the top tax rate on dividends and capital gains to 20 percent from 15 percent. Both candidates would limit but not repeal the alternative minimum tax (AMT), and both candidates support the Auto IRA—a plan that would automatically enroll workers in retirement saving accounts.

Senator Obama proposes a long list of new refundable tax credits—that is, credits that are available to households even if they owe no income tax. The newly refundable credits apply to working, higher education, home ownership, child care, and saving. They would total almost $650 billion over ten years.

Neither candidate would let the estate tax expire. McCain would set a 15 percent tax rate on estates above $5 million; Obama a 45 percent rate on estates above $3.5 million.

McCain would cut the top corporate tax rate from 35 percent to 25 percent and allow businesses to expense short-lived equipment.

On health care, Senator McCain would replace the current exclusion from income tax for employer-provided health insurance with an individual-level refundable tax credit of $2,500 for singles and $5,000 for family coverage. Unlike the current exclusion, the credit would be available for both privately purchased and employer-provided insurance. Obama would provide a refundable tax credit to lower-income families without access to employer-sponsored or public health insurance if they buy insurance in a new insurance exchange.

According to TPC estimates, compared to current law, Obama would cut taxes by $2.9 trillion between 2009 and 2018. McCain would reduce taxes by nearly $4.2 trillion. Including interest costs, Obama’s plan would boost the debt by $3.6 trillion by 2018, McCain’s by $5.1 trillion. These figures are on top of the $2.3 trillion increase that the Congressional Budget Office forecast for the next decade (not counting bailout costs).

Relative to current tax law, the Obama plan would reduce taxes for low- and moderate-income families, but raise them palpably for high-bracket taxpayers. By 2012, middle-income taxpayers earning between roughly $40,000 and $70,000 would see their after-tax income rise by about 5 percent. Those in the top one percent, with incomes in excess of approximately $600,000, would face a 1.5 percent reduction in after-tax income. McCain would lift after-tax incomes an average of about 3 percent for middle-income taxpayers by 2012. But, in sharp contrast to Obama, he would cut taxes for those in the top 1 percent by more than $125,000, raising their after-tax income an average 9.5 percent.

The new President faces a variety of daunting economic issues, including tax policy. The breadth and severity of the financial crisis and economic downturn could well derail previous proposals, while a fairly massive stimulus package may take political priority over more structural and longer-lasting tax changes.