Candidates' Tax Plans May Sound Good, but They're Unsound

The plan doesn't elaborate on which corporate taxes Obama plans to raise by eliminating loopholes and how much money he expects the raise to generate.

The bigger issue is that Obama plans to use taxes he has already promised for other policies. In May, he announced a "universal" health care plan. He intends to pay for his health care plan by "restoring the top two personal income tax brackets and rates on dividends and capital gains to Clinton-era levels, and retaining the estate tax with a $7 million exemption rather than repealing it."

Not only would Obama return capital gains taxes to pre-Bush levels, but he also plans to raise them well beyond 20%. I think the question is whether they'll go to 25%, 30% or higher. Who knows. Perhaps they will go high enough that Warren Buffett will no longer pay less in taxes than his secretary.

Obama has significant support on Wall Street, but I'm not certain Wall Street will be too happy to hear about additional taxes on capital gains and carried interest.

The Obama campaign didn't return calls or emails for comment.

Romney's Take

Former Massachusetts Gov. Mitt Romney takes an entirely different approach to taxes. He wants to encourage the middle class to save by eliminating taxes on savings, dividends and capital gains on those who earn less than $200,000 per year. Yes, he said eliminating -- as in paying zero taxes.

Like Obama's plan, it sounds really great. But how does he plan to pay for it, since it will clearly reduce tax receipts? His policy briefing doesn't mention the policy's fiscal ramifications, but it does suggest -- and supply-side economist Arthur Laffer would be proud -- that tax cuts would result in higher government revenues from great growth.