McCain's economic plan focuses on the middle class
John McCain unveiled a slew of economic initiatives Tuesday aimed at the middle class, including targeted tax cuts, more-accessible student...
WASHINGTON — John McCain unveiled a slew of economic initiatives Tuesday aimed at the middle class, including targeted tax cuts, more-accessible student loans and temporarily lifting the federal gasoline tax for the summer.
The presumptive Republican presidential nominee also called for doubling the personal exemption for dependents on income taxes from $3,500 to $7,000, at an annual cost to the Treasury of $65 billion.
"The truest measure of prosperity in America is the success and financial security of those who earn wages and meet payrolls in this country," the Arizona senator said.
McCain spoke in Pittsburgh and will pitch his ideas today in Milwaukee.
He was vague on how he'd pay for all the goodies. Aides said his proposals would cost $195 billion, but the total appears to be much higher.
His chief economic policy adviser, Douglas Holtz-Eakin, suggested McCain's call to make President Bush's tax cuts permanent shouldn't be counted as a Treasury loss. "The senator is not planning to raise taxes," he said repeatedly.
Under current law, many Bush-era tax reductions are scheduled to expire in 2010. Congress' approval is required to change the law to make them permanent, at a projected annual cost to the Treasury of $100 billion.
McCain repeated his proposed permanent repeal of the alternative minimum tax, which threatens to ensnare 25 million families. Holtz-Eakin estimated a cost to the Treasury of $60 billion a year.
The true cost would be $180 billion a year, according to the Tax Policy Center, run by the Urban Institute and the Brookings Institution, both center-left research centers.
It also was unclear how McCain would pay for his proposed gas-tax holiday, which would run from Memorial Day to Labor Day. The federal gas tax is 18.4 cents a gallon; 24.4 cents for diesel. The idea would cost the Federal Highway Trust Fund — already at risk of going broke next year — billions of dollars.
"That takes $11 billion away from infrastructure spending on roads and bridges, which are badly in need of help as we saw with last summer's bridge collapse," said James Kvaal, domestic-policy adviser for the liberal Center for American Progress Action Fund, a research group.
Holtz-Eakin said money would be taken from general funds to ensure that the Highway Trust Fund didn't run short. But the budget deficit already is projected at $500 billion.
To offset lost revenues, McCain offered a variety of nonspecific spending cuts. By far the most politically explosive one would make older Americans who earn more than $164,000 a year pay more for prescription-drug coverage under Medicare. That brings up the specter of means testing for federal-benefit programs, anathema to the politically powerful seniors lobby.
Other proposed spending reductions include saving $60 billion by "budget scrubbing," or ending pork-barrel projects; $15 billion by freezing all nonmandatory government spending for one year; and $30 billion by closing unspecified tax loopholes. All would face fierce opposition in Congress.
Among other proposals, McCain would:
• Introduce a simpler tax code that Americans could opt into, with only two tax rates and a "generous" — though unspecified — standard deduction.
• Lower the corporate tax rate from 35 percent to 25 percent, yielding $100 billion in lost revenue.
McClatchy Newspapers correspondent Margaret Talev contributed to this report.
Copyright © 2008 The Seattle Times Company
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