Taxes: Here's what the candidates are talking about

— -- Individual tax rates

Unless Congress acts, tax cuts enacted by President Bush in 2001 and 2003 will expire at the end of 2010. McCain has proposed making the tax cuts permanent. He has also proposed increasing the exemption for dependents by $500 each year, starting in 2010. The increase would continue until the exemption totaled $7,000 in 2016. After that, it would be indexed for inflation.

Obama has also proposed making the 10%, 15%, 25% and 28% tax brackets permanent, but would boost the top two tax rates to 36% and 39.6%, their pre-tax-cut levels. Currently, the top tax rate for individual taxpayers is 35%. The increase would raise taxes for Americans who earn more than $250,000 a year.

Obama has also proposed new tax breaks for low- and middle-income taxpayers, including a tax credit of up to $500 for individuals and $1,000 for married couples. He would expand the earned income tax credit, a tax break that benefits the working poor. And seniors with income of $50,000 or less would pay no federal income tax.

The alternative minimum tax

Everybody hates the alternative minimum tax, but nobody knows what to do about it. And that appears to include the presidential candidates.

The AMT was originally designed to prevent the super-rich from avoiding taxes. But because the tax was never indexed to inflation, the number of taxpayers who must pay the tax has gradually increased. An estimated 4 million taxpayers paid the AMT in 2007. Taxpayers who are subject to the AMT are barred from claiming several popular tax deductions, including deductions for state property taxes.

While the AMT is wildly unpopular, scrapping it would cost the government billions in tax revenue. For that reason, Congress can't eliminate the AMT without making broad changes in the tax code, something lawmakers haven't had the time or inclination to do.

Instead, they've prevented the problem from getting worse by approving stopgap measures that limit the AMT's growth. The financial rescue bill signed by President Bush extends the temporary fix through 2008, protecting more than 20 million taxpayers from the AMT.