McCain and Obama have contrasting economic plans
McCain, the presumptive Republican nominee, delivered a speech to a trade group here touting his antitax credentials and highlighting his economic policy differences with Obama, his Democratic rival.
Obama, in turn, accused McCain of wanting “to add $300 billion more in tax breaks and loopholes for big corporations and for the wealthiest Americans, and he hasn’t even explained how he would pay for it.”
The clash over economics came amid widespread concerns over average gasoline prices topping $4 a gallon, a fifth straight month of job declines and a plunging dollar.
Speaking to business leaders at the 2008 National Small Business Summit, McCain vowed to extend President Bush’s income tax cuts when they expire in two years, an idea Obama opposes. McCain also renewed his call for temporarily suspending the federal gas tax this summer, a proposal Obama has derided as a gimmick.
More broadly, McCain promised to reduce corporate tax rates, “break down” foreign trade barriers and push for a “simpler, fairer and flatter tax code.”
“I don’t want to send any more of your earnings to the government,” McCain said.
At the same time, the Arizona senator told the business leaders that Americans “are right to be offended” by the “extravagant salaries and severance deals” of corporate officers who have engaged in “reckless corporate behavior.” He promised to ensure that “wrongdoing of this kind is called to account by federal prosecutors.”
McCain’s backers insist that Obama would raise taxes, crippling efforts to jump-start the economy and help consumers. Democrats counter that McCain has embraced failed Bush administration policies and will plunge the nation further into debt, a charge the Republicans strongly deny.
Obama has proposed tax cuts for middle-income families and retirees, a $50-billion economic stimulus package, a higher minimum wage and expanded unemployment benefits, along with help for homeowners facing foreclosure.
But McCain, in his speech Tuesday, focused on Obama’s support for letting Bush’s tax cuts expire in 2010 for households earning more than $250,000 a year. He also said Obama would increase taxes on unearned income, including stock dividends and capital gains.
“Under Sen. Obama’s tax plan, Americans of every background would see their taxes rise — seniors, parents, small-business owners and just about everyone who has even a modest investment in the market,” McCain said.
Obama, speaking later to reporters after touring a hospital in St. Louis, called McCain’s comments misleading. The Illinois senator said he would cut taxes for 95% of America’s households, while letting the Bush tax cuts lapse on the highest-earning 5%.
He also vowed to eliminate the capital gains tax “for the small businesses and start-ups that are the backbone of our economy.”
During the Republican primaries last spring, McCain faced heavy fire within his own party for initially opposing the Bush tax cuts. At the time, he argued that the cuts unfairly favored the wealthy and were inappropriate while the nation was fighting two wars. He now contends that allowing the tax cuts to expire would amount to raising taxes.
In promising to cut corporate income tax rates, McCain said he would reduce those levies “from the second-highest in the world to one on par with our trading partners.” But that characterization of the nation’s current corporate tax burden was disputed Tuesday.
Among the 30 most developed countries in the Organization for Economic Cooperation and Development, the United States’ official corporate tax rates are near the top.
But because of breaks or loopholes in the tax code, the corporate tax revenue actually collected in the U.S. was fourth-lowest among the 30 nations, according to the organization’s data.
“It’s a bit misleading,” said Bob McIntyre, director of Citizens for Tax Justice, a nonprofit, nonpartisan research and advocacy group in Washington. “The rate is high. But most U.S. companies don’t pay taxes on most of their profits.”
Overall, he said, corporate taxes accounted for about half of all income taxes in the 1960s. They now account for less than 10%.
Still, McCain’s corporate tax cut “would cost $100 billion a year,” said Jared Bernstein, a senior economist at the Economic Policy Institute in Washington and an informal advisor to Obama’s campaign. “And he hasn’t come anywhere near explaining how he would pay for that.”
In his speech, McCain also accused Obama of “talking down” the value of exports and trade agreements. He specifically criticized Obama’s pledge to renegotiate the 1994 North American Free Trade Agreement.
Republicans credit the NAFTA agreement with Canada and Mexico with spurring record exports, while Democrats blame the agreement for causing job losses and sending industries abroad. The issue has special resonance in Ohio, Indiana and other large Rust Belt states that have suffered economic dislocation in recent years.
“We have a sharp disagreement here that I look very much forward to debating,” McCain said.
The Associated Press contributed to this report.