Recently, alot of the debate has focused on taxes - who will cut the taxes? Who will these tax cuts target?

The question of taxes is something that is odd to me - everyone seems to agree that they want it to be lower, but at the same time, few people understand the real impact of taxes and even fewer understand the tax code. So let's start with the basics. Both candidates agree that the tax system needs reform, and both candidates want to cut taxes. The difference lies in the design of the two tax cuts. Essentially, taxes and tax cuts offered by the two candidates are designed to do different things.

The tax plan of John McCain is focused on one thing - investment. Namely, his current tirade against capital gains taxes and his emphasis on tax incentives for businesses are all stalwarts of conservative tax policy. In short, John McCain believes by stimulating investment, we can stimulate this economy by creating new factories and creating new jobs.

In some economic climates, this is an acceptable policy, but the problem is that with the credit market as iti s and the stock market behaving with such volatility, there's a legitimate question about the effectiveness of such an investment-targeted plan.

For one, with the credit market as it is, few businesses have the necessary capital and credit necessary to expand. That means that the central benefit of investment-targeted tax plans (the expansion of business) would likely not occur under McCain. It should be noted, though, that despite some claims, John McCain also wants to close corporate loopholes, but also trades off the closing of these business taxes with a deduction of corporate tax% from 35% (2nd highest in the world) to 25%. It is not yet clear how much impact this will have on the nation's tax income, but what is known is that the tax burden on the top 20% will not increase in any appreciable way under McCain.

Obama's tax plan is far more complicated, because most of his tax plan is conducted through tax initiatives and new tax exemptions, but the crux of the plan is to lower the tax burden on the middle and lower classes. This plan is targeted at increasing consumer spending, as explained by this business week article:

Senator McCain's tax cuts would primarily benefit those with very high incomes, almost all of whom would receive large tax cuts that would, on average, raise their aftertax incomes by more than twice the average for all households. Many fewer households at the bottom of the income distribution would get tax cuts, and those whose taxes fall would, on average, see their aftertax income rise much less.

• In marked contrast, Senator Obama offers much larger tax breaks to low- and middle-income taxpayers and would increase taxes on high-income taxpayers. The largest tax cuts, as a share of income, would go to those at the bottom of the distribution, while taxpayers with the highest income would see their taxes rise. (Business Week)

Currently, and in the last eight years, the tax burden in this country has shifted to the middle 60% and away from the top 20% (but it should be noted that the tax burden has increased on the top 1%). Obama's plans to increase taxes on the richer households and close corporate loopholes will realign the tax burden to give a greater weight to the top 20%. By doing this, more money is given to the middle class, and they would be able to spend, hopefully increasing consumer spending and unlocking this credit crisis. Both of these plans will probably be expensive, so the question is not "who creates a bigger government" or "who generates a bigger deficit*". Rather, the question here is - whose economic vision do you agree with.

*Also, it should be noted that both plans will probably cause a deepening of the deficit. There are some costs that both sides plan to cut, but chances are, we'll be another 200-300 billion dollars in the whole with either candidate as costs of maintaining such a wide-spread foreign policy under McCain and domestic programs under Obama will most likely push the deficit higher and higher. Even as a giant opponent of deficits, however, I find it difficult to care about them right now. Currently, the deficits are rising regardless of actions taken, and balancing the budget will require sacrifices that we are not able to make during the current economic climate. Indeed, the best thing to do right now is solve the financial crisis and then worry about the deficit. Chances are, a significantly improved economy would do more to solve deficits than decreasing government spending anyways.

Essentially, when it comes to the question of taxes, what you need to ask yourself is this - do you believe that an investment based tax plan or a consumer spending based tax plan is more likely to stimualte the economy. If the answer is the former, you should support McCain. If the answer is the latter, you should support Obama.