McCain proposes tax relief

Plan would suspend gas levy, keep Bush cuts, reduce spending

April 16, 2008|By New York Times News Service.

VILLANOVA, Pa. -- Sen. John McCain offered the broadest look yet at his economic policies during appearances in Pennsylvania yesterday, proposing tax reductions and backing away from a pledge to balance the budget by the end of his first term.

A speech in Pittsburgh, delivered on the April 15 deadline for filing taxes, afforded the clearest view to date of what McCainomics might look like.

There was a dash of populism, as McCain criticized executive pay and corporate wrongdoing. There was a strong supply-side bent, with McCain focusing on cutting corporate taxes and making permanent the Bush tax cuts that he once opposed. And there was a less-hawkish note on deficits, as McCain called for spending cuts but did not mention balancing the federal budget.

With the address, McCain sought to overcome the impression that he does not understand the economy well, and the idea being pushed by Democrats that he does not comprehend the economic pain felt by many Americans.

McCain, the presumptive Republican presidential nominee, spoke at length about those hardships and suggested he might break with the economic policies of Presidents Bush and Ronald Reagan.

"It will not be enough to simply dust off the economic policies of four, eight or 28 years ago," he said in the speech, at Carnegie Mellon University. "We have our own work to do."

But a major component of his economic plan centered on tax cuts. Besides making the Bush income tax cuts permanent and reducing corporate taxes to 25 percent from 35 percent, McCain called for eliminating the alternative minimum tax and doubling the value of exemptions for dependents to $7,000 from $3,500, among other recommendations. He also proposed giving taxpayers the option of filing a simpler, shorter tax form each year than is available now.

McCain urged Congress to suspend the 18.4-cent-a-gallon federal gas tax from Memorial Day until Labor Day. He said doing so would provide "an immediate economic stimulus." Such plans have gained little traction recently in Congress, and some environmentalists fear such a cut would encourage more people to use their cars at a time when McCain has made combating global warming a central theme of his campaign.

The McCain campaign put the cost of his tax cuts at roughly $200 billion a year, but its estimate did not include the cost of making the Bush tax cuts permanent, which would more than double that figure.

The campaign said it would offset the lost $200 billion by eliminating pork-barrel projects from the federal budget; putting a one-year freeze on discretionary spending in most federal agencies, later eliminating wasteful programs; broadening the tax base by eliminating loopholes; and spurring economic growth. But its estimate of how much could be saved with such measures was far higher than those of some independent analysts.

McCain's Democratic rivals mocked the proposals. The campaign of Sen. Barack Obama said McCain's proposals represent a continuation of failed Bush policies. Aides to Sen. Hillary Clinton said the proposals would benefit corporations that had helped cause the nation's current economic woes.

McCain - who said in February in Wisconsin that he would balance the budget by the end of his first term as president - seemed to reconsider that yesterday, saying at a news conference later in Villanova that "economic conditions are reversed" and that he would have a balanced budget within eight years. His economic aides said they could pay for all the tax cuts with spending cuts.

The Democratic National Committee did its own analysis, which it said suggested that McCain's proposed tax cuts, coupled with the costs of the wars in Iraq and Afghanistan that he wants to continue, would put the budget trillions of dollars into the red.

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