From the Tax Policy Center:
"Although both candidates have at times stressed fiscal responsibility, their specific non-health tax proposals would reduce tax revenues by $3.7 trillion (McCain) and $2.7 trillion (Obama) over the next 10 years, or approximately 10 and 7 percent of the revenues scheduled for collection under current law, respectively. Furthermore, as in the case of President Bush's tax cuts, the true cost of McCain's policies may be masked by phase-ins and sunsets (scheduled expiration dates) that reduce the estimated revenue costs. If his policies were fully phased in and permanent, the ten-year cost would rise to $4.1 trillion, or about 11 percent of total revenues. Both candidates argue that their proposals should be scored against a "current policy" baseline instead of current law. Such a baseline assumes that the 2001 and 2003 tax cuts would be extended and the AMT patch made permanent. Against current policy, Senator Obama's proposals would raise $700 billion, an increase of 2 percent, and Senator McCain's proposals lose $600 billion, a decrease of roughly 2 percent."
Against this background, Obama - less fiscally irresponsible than McCain but by a smaller margin than I would have hoped - deserves a bit of credit for realism and political courage in proposing the "donut hole" payroll tax increase. But that said, and leaving aside that to make no revenue-raising proposal whatsoever would be worse still, I am not wild about this proposal. Generally I prefer base-broadening to raising marginal rates. Plus I favor slowing the rate of entitlements growth. Rate increases are bound to be necessary by one means or another (enacting a VAT, hence increasing its current rate from zero, is merely another genre of this), but I'd prefer to try to do some of the other stuff at the same time. And from an optimal tax standpoint the marginal rate at upper echelons under the Obama proposal is probably too high, although it's true that this is just a wage tax increase, not a capital income tax increase, which from an efficiency standpoint makes it more defensible.