“We need to give working families a break. For 25 years, we’ve seen gaps in wealth grow larger, with our tax code that favors wealth over work.”
» Bettendorf, Iowa, Nov. 7, 2007

Sen. Barack Obama, D-Ill., says the tax code is riddled with loopholes and special tax breaks that benefit Washington’s special interests. Obama says he’ll restore fairness to the tax code by rewarding work and cutting taxes for America’s workers. He claims that his five-part plan, called “Tax Fairness for the Middle Class,” will provide $80 billion to $85 billion in tax relief to America’s workers, seniors and homeowners. Here are some of his proposals.

Tax cut for America’s working families.

  • Create a new “Making Work Pay” tax credit of up to $500 per person, or $1,000 per working family. Obama says this tax credit will completely eliminate income taxes for 10 million Americans.

Create a universal mortgage credit.

  • This would be a 10 percent credit that homeowners could use even if they don’t itemize. Obama says the current mortgage interest deduction excludes nearly two-thirds of Americans who don’t itemize their taxes. Obama claims that the credit would provide the average recipient with approximately $500 per year in tax savings.

Eliminate income taxes for seniors making less that $50,000.

  • Obama says this will provide immediate relief to 22 million American seniors who will not need to file an income tax return, and will eliminate any income taxes for nearly seven million seniors at a savings of roughly $1,400 each year.

Enable millions of Americans to complete their tax returns in five minutes.

  • Simplify tax filings so that millions of Americans will be able to do their taxes in five minutes. Currently, the IRS receives Americans’ financial information directly from employers and banks. Obama wants the IRS to use the information to give taxpayers the option of a pre-filled tax form to verify, sign and return to the IRS online. Obama estimates it will save up to $2 billion in tax preparer fees.

Level the playing field for American businesses.

  • Eliminate the capital gains taxation of start-up businesses to encourage innovation and job creation.
  • Eliminate special interest loopholes and deductions, such as those for the oil and gas industry, and limit the ability of large multi-national corporations to use tax havens to hide income overseas.
  • Crack down on offshore tax havens engaged in shielding tax evaders from justice by refusing to share tax information with us the way other nations do. Obama would create an international tax evasion watch list to monitor these countries and would use economic pressure to make them comply.
*Sen. Obama’s voting record on tax reform issues:
Voted Topic Date
NO Repealing the Alternative Minimum Tax. March 2007
NO Raising estate tax exemption to $5 million. March 2007
NO Supporting permanence of estate tax cuts. Aug. 2006
NO Permanently repealing the estate tax. June 2006
YES $47 billion for military by repealing capital gains tax cut. Feb. 2006
NO Retaining reduced taxes on capital gains and dividends. Feb. 2006
NO Extending the tax cuts on capital gains and dividends. Nov. 2006
Source: On the Issues

*Members of Congress sometimes vote on different versions of a bill. Voting yes or no on one doesn’t mean they’ll vote the same way on succeeding versions.