The Check Family |
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Base Plan (current) | |
| According to the Tax Policy Center, a non-partisan project of the Urban Institute and Brookings Institute, the Check family pays 16.1% of their annual income of $63,220 in federal taxes. The capital gains tax rate is currently 15%. | |
 | Obama Plan |
| The Tax Policy Center's review of the Obama for President tax proposals, as provided by the campaign's economic advisors, indicates a 2.5% reduction in the average federal tax rate for families with children, earning annual income between $50,000-75,000. Obama's economic advisors have been non-specific, but indicate that an increase in the capital gains tax rate should be expected.
For our Obama Plan demonstration, we have set the Check family's average federal tax rate to 13.6% and the capital gains tax rate to 25%. |
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 | McCain Plan |
| The Tax Policy Center's review of the McCain for President tax proposals, as provided by the campaign's economic advisors,
indicates a 1.3% reduction in the average federal tax rate for families with children, earning annual income between $50,000-75,000.
For our McCain Plan demonstration, we have set the Check family's average federal tax rate to 14.8%. We have left the capital gains tax rate at 15%. |
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| Source: 1 Urban Institute and Brookings Institution. Tables T08-0202 and T08-0181.
Tax Units with Children.
The Tax Policy Center (TPC) is a joint venture of the Brookings Institution and the Urban Institute, based in
Washington, D.C. The Center is mostly composed of tax lawyers, accountants and former politicians; their main
focus is to provide accessible analysis and facts about tax policy to policymakers, journalists, citizens,
and researchers.
2 Read Senator Barack Obama's comments on the capital gains tax rate: CNBC's "Closing Bell" Interview on March 27, 2008. |
Base Plan (current) | |
| As of August 2008, the consumer price index (CPI), the key measure of inflation is 5.4%. For our base plan, we have set the default inflation rate to 4.5%; this number is the average inflation rate from 1960-2007, for those years when a Republican was president. For a historical perspective, the average CPI from 1913-2007 has been 3.42%. | |
| Obama Plan |
| For our Obama Plan demonstration, we have set the default inflation rate to 3.81%; this number is the average inflation rate from 1960-2007, for those years when a Democrat was president. | |
| McCain Plan |
| For our McCain Plan demonstration, we have set the default inflation rate to 4.5%; this number is the average inflation rate from 1960-2007, for those years when a Republican was president. | |
| Note: For a more recent perspective - consider the average inflation rate during Bill Clinton's presidency was 2.61% (1993-2000). The average inflation rate during George W. Bush's presidency, excluding 2008, has been 2.69% (2001-2007). | |
| Source: 1 Current inflation rate based on data from the U.S. Department of Labor
Bureau of Labor Statistics.
2 Historical inflation rates based on data from the Economic Report of the President. TABLE B-63 - Changes in special consumer price indexes, 1960-2007. 3 Slate.com: Politicians Lie, Numbers Don't. |
Base Plan (current) | |
| Currently, the default growth rate for investments is set to 6.59%. This number is the Dow Jones Industrial Average's average total return performance for the last 5 years. The Check family does not have any money currently saved or invested. The family will invest all the money made available by lower taxes in college and retirement savings. | |
| Obama Plan |
| For our Obama Plan demonstration, we have set the default growth rate on investments to 10.85%; this number is the historical average return of the Dow Jones Industrial Average when a Democrat was president. | |
| McCain Plan |
| For our McCain Plan demonstration, we have set the default growth rate on investments to 8.25%; this number is the historical average return of the Dow Jones Industrial Average when a Republican was president. | |
| Note: Over the past 60 years, the average Dow Jones Industrial Average annual rate of return while a Democrat was president has been 15.26%, more than six percentage points higher than the 9.01% rate of return when Republicans have held the presidency. The average return on the Dow Jones Industrial Average during Bill Clinton's presidency (1992-2000) was 19% per year, while the rate of return during George W. Bush's presidency has been 0.22%. | |
| Source: Jeremy Siegel, currently the Russell E. Palmer Professor of Finance at the
Wharton School of the University of Pennsylvania, has written and lectured extensively
about the economy and financial markets.
1 Siegel: Are Republicans or Democrats Better for the Stock Market? 2 Siegel: Which Party is Better for Stocks? 3 Forbes: Presidents And The Stock Market |
Base Plan (current) | |
| The Check family wants their children to attend college. While they would like to help pay for their children's college education, they don't currently have the means to save for it. 34% of all money saved from reduced taxes will go towards college savings. | |
| Obama Plan |
| Obama plans to make college affordable for all Americans by creating a new American Opportunity Tax Credit. This credit
ensures the first $4,000 of a college education is completely free.
For our Obama Plan demonstration, the Check family will receive $4,000 toward each child's college education during the child's initial year of college enrollment. |
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| McCain Plan |
| McCain's plan for higher education includes strategies such as simplifying both Federal financial aid and higher
education tax benefits; however, the Republican candidate does not outline a specific change in fiscal policy.
For our McCain Plan demonstration, no changes will be made. |
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| Source: You can read more about each candidate's proposals on their websites:
1 Barack Obama 2 John McCain |
Base Plan (current) | |
| The Check family needs to save for retirement. Up to this point, like many families, the Checks have not been able to save for their twilight years. For our demonstration, 66% of all money saved from lower taxes will go towards retirement savings. | |
| Obama Plan |
| The Obama for President campaign plans to increase retirement savings by creating a savings match for
low and middle-income Americans. This plan will match 50% of the first $1,000 of savings for families
that earn less than $75,000.
For our Obama Plan demonstration, we will match 50% of the first $1,000 of retirement savings for the Check family. |
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| McCain Plan |
| The McCain for President campaign does not outline a specific change in fiscal policy for retirement.
For our McCain Plan demonstration, no changes will be made. |
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| Source: You can read more about each candidate's proposals on their websites: 1 Barack Obama 2 John McCain |
If the candidates' policies are implemented and historical averages hold true or are surpassed, the Check family will do better under the Obama Plan. The direct benefits of Obama's tax structure and special tax breaks for retirement and college have a stronger impact on the family's finances than the indirect benefits of the McCain Plan. This conclusion isn't to say the Obama Plan completely solves the Check family's financial problems. Obama's "American Opportunity Tax Credit," while providing a little money for college, seems to be out of touch with current college costs. The Check family will have to work for scholarships and grants or they will have a substantial loan burden. Despite receiving a small tax credit under the Obama Plan, and putting their tax savings into a 401k, the Check family will have a retirement shortfall in just a few short years. The family will need to make additional adjustments to their savings strategy to focus even more on retirement and possibly push their retirement dates well beyond 65 years of age. The "X" factors the Check family needs to be concerned about under either the Obama or McCain Plan are wage growth and inflation; wage growth rates are currently falling further and further behind inflation. For the Check family, this factor indicates salary increases will most likely be less than inflation, thus any extra income the Checks will have as a result of lower taxes will be quickly eaten up by paying higher costs to maintain their current standard of living. This will leave less and less money for retirement and college savings and could even force them to make cuts. This concern is especially true for the Check family where, with little annual savings, a large percentage of their income is used to pay for items subject to inflationary pressures. |
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Review the family's current financial condition and see how their financial plan could be affected by the next president. Let's See Forecasts
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The family's Let's See charts are interactive. The forecasts illustrate information in the family's financial plan including incomes, assets, debts, and expenses.
Click anywhere on the chart to see the legend. The legend includes the name and annual values of each item in the forecast.
Each family has three plans: a Base Plan (the family's current finances) and two "What If" plans: an Obama Plan and a McCain Plan.
Compare any two financial plans side-by-side by clicking the Compare Plans button. Select the plans you want to compare using the Select Plan drop-downs at the bottom, right of the screen.
Use the left navigation to see every individual item in the financial plan - from debts and annual expenses, to retirement and college savings, weddings, vacations and everything in-between.
You can edit each of the family's three financial plans. You can also create a new plan for the family and start by making a copy of one of the current plans.