Issue 2.1: The Economy (updated)

It's been awhile since we've had an "issue" post, so I thought I'd update us on some new economic policies that were proposed by the candidates in the past week to deal with our current economic woes. Lucky you, most of them have to do with taxes. Don't worry, I'll try to make it as painless as possible.

As expected, both candidates have some similarities between their proposals. For example, both McCain and Obama want to give people the option of withdrawing some of their retirement money to help pay the bills. McCain wants to do this by lowering the tax rate to 10% on IRA and 401(k) withdrawals up to $50,000. Obama wants to let people withdraw up to $10,000 in 2008 and 2009 without paying an early withdrawal penalty (normally if you withdraw money from your 401(k) before you're 59.5 years old, you pay a penalty of 10% of the amount you withdraw). Under Obama's proposal, you'd still have to pay the normal tax amount on your withdrawal even though you'd avoid the penalty. Under McCain's, you'd still have to pay the penalty even though the tax rate would be lower.

The two candidates have also suggested differing proposals. McCain wants to use $300 billion of the recently passed bailout plan to buy people's bad mortgages and allow them to refinance for a more manageable rate and terms. This is similar to McCain's earlier proposal of allowing qualifying homeowners to refinance their bad mortgages (see here for more on that).

Obama wants to give a tax credit (don't remember what a "tax credit" is? don't worry, refresh your memory here) to companies that create new jobs here in the United States by giving them $3,000 per each additional full-time employee that they hire in the U.S. during 2009 and 2010. This is also similar to an earlier proposal to give companies tax incentives to create jobs here in the U.S. (see here for more on that).

Obviously there are other proposals in each of the candidates new plans, but I think that'll do for now. 

In case you're interested, the Obama campaign refers to their plan as the "Rescue Plan for the Middle Class." You can read the whole thing here. The McCain campaign refers to their plan as the "Pension and Family Security Plan." You can read more about it here.