The common wisdom is that presidential election years can uncork stock-market rallies.

The reason is that the incumbent president will goose the economy and pull out all the stops to stay in office.

But there’s no incumbent this year, so investors will be paying attention to other matters, particularly the proposed income-tax policies of candidates Barack Obama and John McCain.

“Our view is that regardless of the administration that takes office, there’s going to be tremendous pressure on that administration to do something about the budget deficit, and one of the areas that will come under increasing focus will be capital-gains tax rates and, by extension, income-tax rates,” said Hans Olsen, chief investment officer for J.P. Morgan Private Client Services.

Obama wants to increase the tax on capital gains and dividends for taxpayers earning $250,000 or more.

McCain wants to keep the taxes on capital gains and dividends at their current levels.

The maximum long-term capital-gains tax rate for individuals is 15 percent — the same for qualified dividends.

Changes in both would definitely impact investors’ wallets, particularly those who live off their dividends.

While you shouldn’t let tax considerations be the primary driver of investment decisions, the possibility of changes in tax rates gives investors something to think about.

“The bell is being rung,” Olsen said.

The long-term capital gains tax rate “is so low, relative to what it has been, relative to where it likely could go with the turn in the new administration” that investors expecting a large investment gain should consider making a move because “it’s probably never going to get as good as it is right now,” he said.

How the candidates approach investment taxes isn’t the only tax issue that will be on investors’ minds.

Obama would extend tax cuts initiated by President Bush and due to expire at the end of 2010 only for taxpayers earning under $250,000. Those earning $250,000 or more would see those cuts disappear.

McCain would make the cuts permanent for all individual taxpayers.

“Low taxes are generally favored by the stock market, so McCain’s endorsement of extending the Bush tax cuts, while Obama favors eliminating some of the tax cuts ... would seem to indicate that the stock market might react better to McCain’s proposals,” said Mark Luscombe, principal tax analyst at CCH, which publishes tax information for tax professionals.

“On the other hand, the stock markets tend to react negatively to growing federal deficits. If McCain can come up with spending reductions to pay for his tax cuts, the market would like that,” he said.

The one wild card here — and it’s an important one — is the economy.

“Ultimately the stock market likes a growing economy, and whatever combination of revenue-raising and spending, as well as Fed monetary policy, restores the economy to health and keeps it chugging along is likely to be well-received by the markets,” Luscombe said.

Pamela Yip is a personal finance writer for The Dallas Morning News and can be e-mailed at pyip@dallasnews.com