McCain's Plan for Working Class Offers Plenty for Corporate World
Wednesday, April 16, 2008
Sen. John McCain yesterday offered sweeping rhetoric about the economic plight of working-class Americans, promising immediate assistance even as he spelled out a tax and spending agenda whose benefits are aimed squarely at spurring corporate growth.
In a speech billed as the most comprehensive summary of McCain's economic vision to date, the candidate proposed to eliminate the alternative minimum tax, slash corporate income tax rates and offer a grab bag of other business breaks. His most direct proposal for relief to working-class voters was a call to suspend the federal gasoline tax for the summer driving season.
"The effect," he told an audience at Carnegie Mellon University in Pittsburgh, "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."
As the U.S. economy slides toward a possible recession, McCain has struggled to find the right pitch for his economic proposals. When he first suggested the government should not rescue speculative lenders or reckless home buyers, he was greeted with withering criticism from Democrats who accused him of insensitivity in the face of a housing crisis. When he tacked to the left to suggest he did favor government intervention, he was called a flip-flopper.
In yesterday's speech, McCain played to his maverick image, taking corporate chieftains to task for their "extravagant salaries and severance deals." He even called out by name Angelo R. Mozilo, the chief executive of imploding mortgage giant Countrywide, and James E. Cayne, former chief executive of Bear Stearns, which was bailed out by an emergency line of credit from the Federal Reserve Board.
"In my administration, there will be no more subsidies for special pleaders, no more corporate welfare," McCain said.
But much of what he detailed was a corporate special pleader's dream: a cut in the corporate income tax rate, from 35 percent to 25 percent, a proposal to allow businesses to write off the cost of new equipment and technology from their taxes, a ban on Internet and new cellphone taxes, and a permanent tax credit for research and development.
He promised to remove the "myriad corporate tax loopholes that are costly, unfair and inconsistent with a free-market economy," but he offered no specifics.
"I wish he'd be as aggressive with tax pork as he is with spending pork," said Leonard E. Burman, an Urban Institute tax policy analyst.
And McCain's proposed "middle-class tax cut" -- a full repeal of the alternative minimum tax -- stretched the definition of middle class. Of the 4 million taxpayers paying the AMT, 93 percent earn between $200,000 and $1 million, according to the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution.
McCain's rivals and Democratic critics pounced on the speech, calling it a rehash of President Bush's economic policies.
McCain "offers no change from George Bush's failed policies by going full speed ahead with fiscally irresponsible tax cuts for the wealthiest Americans," said Bill Burton, a spokesman for Sen. Barack Obama.
McCain aides defended the speech as a comprehensive vision for the country's economy that balances the challenges facing struggling workers with the need to help companies be more competitive and hire more workers.
Faced with recent attacks suggesting he is detached from the concerns of average Americans, McCain sought to tap into growing angst about rising prices, failing mortgages and the loss of jobs. He declared that "millions of working men and women in Pennsylvania, Ohio, Michigan and beyond can tell you how urgent is the work before us."
McCain called for higher tax deductions for children and aid for students seeking to get loans despite the credit crunch. And he repeated his plan for federally backed loans to help some homeowners who face foreclosure.
He praised "workers and entrepreneurs" and took special aim at chief executives of failing mortgage companies and other big businesses.
But tax cuts, mostly for corporations and wealthy individuals, remain the centerpiece of McCain's economic agenda.
He said his support for making Bush's tax cuts permanent would benefit people from all income levels by making sure that taxes on dividends and capital gains stay low. But most lower- and middle-income investors have the vast majority of their stock and bond holdings in retirement accounts that are exempt from federal taxation. A worker with income between $50,000 and $75,000 got an average tax cut from the dividend and capital gains changes of $43. Those with incomes over $1 million saved $37,962 on average, according to the Tax Policy Center.
McCain offered no details about a plan to create a simpler alternative tax system, other than saying it would have two tax rates and a more generous standard deduction, and taxpayers could chose whether to use it or the current system. McCain's friend and former rival for the Republican nomination, Fred D. Thompson, proposed just such a system, with no AMT and a 15 percent tax rate and 25 percent tax rate. Because taxpayers would be allowed to choose whichever system gave them the lowest tax bill, critics estimated that the cost to the Treasury could be in the trillions of dollars.
McCain advisers acknowledged that the costs to the Treasury would be substantial. Full repeal of the AMT would cost $1.6 trillion over 10 years, assuming the extension of Bush's tax cuts. A summer gasoline tax holiday would cost the Treasury roughly $9 billion. The corporate tax cuts would cost $100 billion a year, said Douglas Holtz-Eakin, McCain's senior policy adviser.
In all, Holtz-Eakin said, McCain's proposals would cost about $200 billion a year in tax revenue but would be offset by ending congressional earmarks, growth in the economy and other savings.
McCain repeated his vow to oppose congressional earmarks and promised a "top to bottom" review of federal discretionary spending.
"Every program comes with a built-in assumption that it should go on forever, and its budget increase forever," he said.