Edwards proposes middle-class tax cuts

It's critical that all the Democrats make the case that this country can't afford Bush's tax giveaway to the rich. Class welfare for the tonied elite is bad for AMerica, but the Democrats have to present an alternative to stave off the inevitable "tax and spend" caricatures that follow. As we all know, Dean has proposed a health care initiative that is well-documented and which will bring a measureable benefit to working-class Americans - but now Edwards has stepped forward with an equally compelling alternative - middle class tax cuts.

The plan, previewed by Edwards' advisers, starts by getting the government in the business of matching retirement plans such as 401 (k)s and Individual Retirement Accounts. Under his proposal -- open to people earning less than about $50,000 -- the government would match or nearly match individual contributions up to $500, much like what many companies do for their employees.

The plan also includes a tax credit of up to $5,000 for first-time house buyers with moderate incomes. The exact cap has not been determined.

To encourage more savings, Edwards would cut capital gains taxes to families earning less than $130,000 a year. They would pay no taxes on the first $1,000 of capital gains, and their rates would be reduced by about half beyond that. The lower rates applies only to stocks held for at least three years and gains of up to $10,000 per family.

Those same families would pay no taxes on their first $500 of dividend earnings.

Reversing Bush's tax cuts, Edwards would increase capital gains taxes on people earning more than $350,000. That would ensure that investment gains of the wealthy would be taxed at the same rate -- 25 percent -- as middle class incomes.

He also would repeal the 2001 and 2003 Bush tax cuts as they apply to the top two income brackets -- those earning more than $240,000.

Those changes to Bush's plan on dividends and capital gains would save the government $300 billion over 10 years, aides said. Edwards' tax cuts would cost half that, leaving the rest to pay down the federal debt. He said he will find money elsewhere to improve health care.

In contrast, Missouri Rep. Richard Gephardt and former Vermont Gov. Howard Dean would repeal both Bush tax cuts, including provisions that benefit the middle-class, and spend the money on reforms that guarantee access to health care. They say health care reform would be a boon to the middle class.

Gephardt has pledged to follow up health care reform with a child tax credit and reductions in the estate tax and taxes on married couples, all geared to the middle class.

Dean has not decided whether there will be any money left after health care reform for middle-class tax cuts.

(aside - note that Dean is rightfully acknowledged as the gold standard against which all other Democrats' plans are compared to. This is a significant victory in its own right).

The question is, what brings maximum benefit to the working class? health care or direct money returned via tax cuts? The other question is, which idea will sell better to the moderate voters in the general election - many of whom are increasingly swayed by the classica conservative argument that the government should be restrained (let's not underestimate the simple effective power of the GOP meme that "it's your money" among large swathes of the American public) .

UPDATE: all those non-Dean candidates look alike to me, apparently. Fixed.