McCain Proposes Tax Cuts, Lashes Democrats

Republican presidential hopeful John McCain on Tuesday called for a summer gas tax holiday for Americans wincing at high pump prices as part of a wide-ranging plan to help the ailing U.S. economy.

John McCain
John McCain

Arizona Sen. McCain, accused by Democratic rivals Barack Obama and Hillary Clinton of seeking to extend the economic policies of President George W. Bush, proposed middle-income tax cuts, accused the Democrats of backing big tax increases and distanced himself from the Bush government.

Of most immediate effect to consumers was his appeal to the U.S. Congress to suspend the 18.4 cent federal gas tax and 24.4 cent diesel tax from Memorial Day at the end of May to Labor Day in early September.

The candidate will discuss his economic plan in further detail during an appearance on CNBC's "Kudlow & Company" at 7 p.m. New York time Tuesday.

Americans are spending more than ever to fuel their cars as the average price for gasoline has climbed to a new high of $3.39 a gallon and is projected to go higher this summer.

"The effect will be an immediate economic stimulus — taking a few dollars off the price of a tank of gas every time a family, a farmer or trucker stops to fill up," McCain said in a major speech on the economy.

During the same period he would suspend U.S. purchases of oil for the emergency stockpile known as the Strategic Petroleum Reserve because he believes the purchases are contributing to higher gas prices.

McCain proposed establishing a simpler U.S. tax system to serve as an alternative to the current tax code and give Americans a choice of which one to use. (See McCain's speech on tax cuts in the CNBC videos 1 and 2 at left.)

As in the past, he pledged to seek a reduction in the corporate tax rate from 35 percent to 25 percent because "high tax rates are driving many businesses and jobs overseas."

Obama, McCain Trade Shots

McCain also proposed a phase-out of the alternative minimum tax, a tax originally set up to ensure that rich Americans with a lot of tax deductions pay a minimum amount of tax but that is now requiring millions of Americans to pay more taxes.

He said he wanted to save more than 25 million middle-class families more than $2,000 every year.

He also proposed relief for student loans and would double the personal tax exemption for dependents from $3,500 to $7,000.

Obama, speaking to a labor gathering in Washington, accused McCain of trying to extend the Bush tax cuts that he had originally opposed.

"John McCain seems to think that the Bush years have been pretty good," Obama said. "In fact, he's running for a third Bush term. He's offering more of the same."

McCain used his speech not only to put some distance between him and the Bush administration but also to say both Democrats and fellow Republicans are guilty of spending excesses.

(For Tuesday's CNBC interview with McCain Senior Economic Advisor Nancy Pfotenhauer, click here.)

He criticized his Democratic rivals for ambitious spending plans that he said would causes taxes to rise for "Americans of every background," totaling $1 trillion over a decade.

He poked fun at Obama's book title, "The Audacity of Hope," by saying: "All these tax increases are the fine print under the slogan of 'hope.' They're going to raise your taxes by thousands of dollars per year — and they have the audacity to hope you don't mind."

McCain said it is possible to save $100 billion by ending wasteful spending and weeding out unneeded government programs and other "budget reforms," and use the savings to pay for the business income tax cut.

McCain proposed reducing spending in the federal government's Medicare prescription drug program by requiring older couples making $160,000 to pay higher premiums for the benefit if they are enrolled in the program.

Many conservative Republicans have criticized the drug program, a product of the Bush administration, as too large a benefit and believe it should be scaled back.