NEW YORK (CNNMoney.com) -- John McCain and Barack Obama have starkly different philosophies about tax policy - how to raise the revenue needed to support government programs, spur growth and ensure economic fairness.

But voters really want to know one thing: How would the presidential candidates' views trickle down to their tax bills? A report released Wednesday by a nonpartisan policy group in Washington, D.C., takes a big first step toward answering that question.

According to the Tax Policy Center's findings, the common assumptions most people make about the plans of McCain, the presumptive Republican nominee, and Obama, the Democrats' pick, are not wildly off-base.

McCain: The average taxpayer in every income group would see a lower tax bill, but high-income taxpayers would benefit more than everyone else.

Obama: High-income taxpayers would pay more in taxes, while everyone else's tax bill would be reduced. Those who benefit the most - in terms of reducing their taxes as a percentage of after-tax income - are in the lowest income groups.

Under both plans, all American taxpayers could pay a price for their tax cuts: a bigger deficit. The Tax Policy Center estimates that over 10 years, McCain's tax proposals could increase the national debt by as much as $4.5 trillion with interest, while Obama's could add as much as $3.3 trillion.

The reason: neither plan would raise the amount of revenue expected under current tax policy - which assumes all the tax cuts expire by 2011. And neither plan would raise enough to cover expected government costs during those 10 years.

"Distributionally, they're markedly different. But in terms of their impact on revenue, the two plans are not terribly different," said Roberton Williams, principal research associate at the Tax Policy Center and the former deputy assistant director for tax analysis at the Congressional Budget Office.

Advisers from both campaigns told CNNMoney.com in e-mails that they would comment on the center's findings, but they had not done so as of Wednesday morning.

In addition to making the 2001 and 2003 tax cuts permanent, McCain says he would double the exemption for dependents, lower the corporate tax rate, make expensing rules more generous for small businesses and lessen the bite of the estate tax and Alternative Minimum tax.

The net result: compared with their tax bill today, taxpayers on average would see their tax bill cut by nearly $1,200. That means their after-tax income would rise by 2%.

But those in the lowest income groups would only see their after-tax income rise by less than 1% (or between $19 and $319). By contrast, the highest-income households - those with incomes of at least $603,000 - would see a boost in after-tax income of 3.4%, or more than $40,000.

Obama's plan would keep the 2001 and 2003 tax cuts in place for everyone except those making more than $250,000, and he would increase the capital gains tax.

Obama would also introduce new tax breaks for lower and middle-income groups. Such breaks include expanding the earned income tax credit, giving those making less than $150,000 a $500 tax credit per person on the first $8,100 in income, giving those making under $75,000 a 50% federal match on the first $1,000 of savings, and exempt seniors making less than $50,000 from having to pay income tax.

Like McCain, Obama would lessen the bite of the estate tax and the Alternative Minimum Tax, but to a lesser degree.

The net result: compared with their tax bill today, taxpayers on average would see their tax bill cut by nearly $160 under Obama's plan. That means their after-tax income would rise by 0.3%.

But those in the lowest-income groups would enjoy the biggest after-tax income rise as a percentage of income - between 2.4% and 5.5% (worth between $567 and $1,042). By contrast, the highest-income households - those with at least $603,000 in income - would see a dramatic decline in their after-tax income - a drop of 8.7%, or $116,000.

Williams said the Tax Policy Center analysis should be viewed as a work in progress. Researchers plan to update it as they get more information about the plans from the campaigns and if the candidates introduce new tax policies between now and Election Day.

The center will also incorporate the tax elements of McCain's and Obama's healthcare proposals when they update their findings.

How the candidates' tax plans would affect economic growth is an open question. "It depends on how the deficits are closed," said Tax Policy Center director Len Burman in a call with reporters.

NEW YORK (CNNMoney.com) -- The latest hit to the economy could come from state houses and city halls across the nation, which are in their worst budget crisis in years.

With falling revenue from sales and income taxes, and property-tax declines looming, states, cities and towns have already laid off tens of thousands of government employees. Many expect more job cuts ahead as public officials struggle to balance their budgets.

The American Federation of State, County and Municipal Employees, a public employees union, says about 45,000 government layoffs have been announced this year.

All but four states are set to begin their new fiscal years on July 1, which means that tough decisions will have to be made soon. Economists say that cutbacks in jobs and spending by local governments could be a major drag on the overall economy.

"This isn't a wrecking ball to a healthy economy, but it could be the straw that broke the camel's back," said Bob Brusca, economist with FAO Economics in New York.

There are 29 states, including California, Florida and Ohio, facing a combined budget shortfall of at least $48 billion in the fiscal year that starts July 1, according to the Center on Budget and Policy Priorities (CBPP), a liberal think tank.

The National Association of State Budget Officers estimates that spending by all 50 states will be up 1% in fiscal 2009. But that would be the third lowest increase in the past three decades.

There are nearly 20 million state and local government employees in the country. So a 1% decline in employment at cities, towns, schools and states would result in a job loss of almost 200,000 people, a much larger amount than we've seen from battered sectors such as automakers or home builders in the past two years.

Even in states, towns and cities not yet laying off people, hiring freezes and early retirement packages are now common, said Robin Prunty, senior director in the public finance department of credit rating agency Standard & Poor's.

"The biggest cost they face is related to personnel," she said. "You typically do have some downsizing."

Tennessee plans to cut 2,000 positions, or about 5% of that state's work force, according to the CBPP. New Jersey is looking at cutting, 3,000 jobs while Ohio may trim 2,700 positions. The Detroit News reports that Detroit may lay off 1,300 workers after July 1 if the City Council doesn't sell the Detroit-Windsor Tunnel.

Brusca said many of the local governments facing the biggest squeeze are in Michigan and Ohio, which already have the weakest local economies, causing the unemployment situation in those hard-hit areas to worsen further.

What's more, Kerry Korpi, director of research for the American Federation of State, County and Municipal Employees, said local governments are faced with a downturn in tax revenue at the same time that there is greater demand for many of the social services they provide.

At the same time, many local governments are also grappling with much higher expenses due to rising fuel prices.

The 2001 recession was tough for state and local governments because even after the economy started to pick up, job losses continued for nearly two years.

But property tax revenues increased during that downturn as home prices and housing construction boomed.

Sales taxes, income taxes and property taxes each make up roughly a third of the tax collections from state and local governments, according to CBPP.

This local government budget crisis is likely to be more severe, according to experts, because the bust in home building and the decline in home prices will cut into property tax collections.

And it will probably get worse before it gets better -- even if the national economy starts to show signs of improvement.

That's because income and property taxes are likely to see declines lag the current slowdown. Sales tax declines are an early sign of a weakening economy.

But the drop in income taxes from job losses this year might not hit government revenue until next year while a drop in property taxes from a house being sold in the foreclosure process might not be felt in property tax collections for more than a year.

Still, the problems are already serious enough to cause widespread budget problems and repeated downward revisions in spending plans.

"Some budgets were out of balance almost immediately upon being introduced," said S&P's Prunty.

The city of Vallejo, Calif. filed for bankruptcy last month due to a ballooning budget deficit from soaring employee costs and declining tax revenue. Labor contracts with the city's unions were part of the problem but the city's plunging real estate market also was a factor.

Home values in Vallejo are down 24% year-over-year and 91% of homeowners who bought in the past two years have mortgages larger than their home's value, according to real estate site Zillow.com.

While Vallejo's housing problems are an extreme, they are not unique to that San Francisco suburb. Experts say the hit to property taxes that lays ahead for many cities could make this local government budget crisis the worst in nearly 30 years.

That's more bad news for an overall economy already fighting enough headwinds.

"The potential is there for this to be fairly prolonged," said Prunty. 

NEW YORK (CNNMoney.com) -- With a nationwide average gas price of just about $4 a gallon, lots of people are thinking there must be something the government can do to help.

Some things which contribute to high gas prices are largely out of the government's control. OPEC will produce as little oil as it sees fit, largely independent of any U.S. intervention. Developing nations will continue to subsidize gas prices, helping their growing economies and keeping demand high.

Areas where the government can help, like a big push into alternative energy, more drilling in the United States, or a jump in fuel efficiency standards, will take years to materialize. Even then, any price decline is likely to be small.

As consumers scramble to adjust their lives to deal with high gas prices, experts debate what the government can do to help in the short term.

It's unclear if any of the ideas being discussed will work. Some say Americans will just have to deal with $4 gas and learn to use less of it.

Tax oil companies more, give the money to motorists. This idea is a central part of Barack Obama's energy platform.

The candidate would impose a windfall profits tax on the big oil companies whenever oil crossed the $80 a barrel mark. The cash would be given to low income people to help them offset their energy costs.

Other proposals in the Senate include selling rights to emit greenhouse gasses - known as carbon credits - and giving the proceeds to all households making under $100,000 a year.

But opponents say raising taxes on oil companies will result in less oil production, and ultimately lead to higher prices. If the government didn't tax oil companies and simply borrowed the cash,that would only hurt the dollar, and send oil prices higher. more

Limit oil speculation. Many people believe oil speculators are essential to a properly functioning market.

But some say they have too much free rein and should be subject to greater restriction.

"The amount of money going into oil speculation is driving the price," said Judy Dugan, research director at Consumer Watchdog.

Dugan is calling for increasing the amount of money oil investors need to put up to buy contracts. She also wants more disclosure of trading positions held in overseas or electronic markets.

Dugan may be on to something. The Commodities Futures Trading Commission recently said it is requiring greater disclosure, and oil prices backed off nearly $9 from recent highs.

But opponents urge caution. They say supply and demand are driving high oil prices. Fewer speculators in the market, they say, will just make it harder to secure contracts and make it easier for a single player to manipulate prices. More.

Ease refining restrictions. Refineries seem to be in a perpetual mess. They currently have to make over 40 types of gasoline blends to meet clean air requirements in different areas. They are also only running at about 85%capacity.

Easing clean air requirements or reducing the number of blends made might bring down prices.

"It's obviously a trade off with environmental concerns," said John Kilduff, an energy analyst at MF Global in New York. "But it might take some of the stress off refiners."

Dugan is also calling for more information about refiner's profit margins, and perhaps laws requiring them to make more gas.

But the industry says making all those different blends actually doesn't cost that much more money. And other analysts say refiners are barely turning a profit running at 85% capacity, as gasoline prices have not risen as much as the price of crude oil. more

Lift the ethanol tariff. Ethanol from places like Brazil, made with sugar cane that packs more energy than U.S. corn-based ethanol, is currently subject to a54-cent a gallon tariff, designed to protect the domestic ethanol industry from foreign competition.

Since ethanol is a required component in gasoline, critics of the tariff say lifting it would mean cheaper gas for everyone.

But with ethanol making up less than 10% of the nation's gasoline supply, any drop in gas prices would likely be minimal.

Open the Strategic Petroleum Reserve. Congress recently directed the Bush administration to stop filling the reserve to the tune of 70,000 barrels a day, or 0.3% of the nation's daily oil consumption.

Analysts said the amount of oil involved was too small to have any effect on prices. They were right: oil prices actually rose following the directive.

Some say releasing oil from the reserve, located in giant salt caverns along the Gulf of Mexico and holding over 700 million barrels of oil, would send a message to traders that the government is not willing to let oil prices go up forever.

But others say the reserve serves an important role as a buffer against supply disruptions from overseas, and traders would bid up prices if the reserve were smaller. More.

Suspend the gas tax. This idea was roundly criticized when proposed first by John McCain and later by Hillary Clinton.

Analysts said doing away with the 18.4 cent per gallon federal gas tax over the summer would leave road repair dangerously underfunded, and could even lead to higher gas prices as people drove more.

Still, the idea has it's backers.

"I thought it maybe wasn't a bad idea," said Kilduff, who noted that eliminating state taxes as well - which currently average an additional 21 cents a gallon - could translate into minor savings for motorists. More.

The fact that these proposals have so many caveats, and would likely bring prices down only moderately or not at all, leaves some analysts saying there's not much the government can do to lower prices.

High gas prices are here to stay, and consumers are just going to have to bear the burden until they figure out how to use less fuel, they say.

"Like the president said, it's an addiction," said Lee Schipper, a visiting scholar at University of California Berkeley's Transportation Center. "There's going to be a time when going cold turkey hurts."

Moreover, even if the government could lower prices, it might not be in everyone's long-term interest.

"It's only when the price is high that people actually do things" to conserve, said Schipper. "Gas at $2 a gallon underprices the real cost to the environment and the nation."