McCain Proposal Seeks Tax Breaks Worth $52 Billion

By Michael D. Shear
Washington Post Staff Writer
Wednesday, October 15, 2008

BLUE BELL, Pa., Oct. 14 -- Sen. John McCain proposed $52 billion in tax breaks on Tuesday that aim to encourage savings and provide relief to seniors and the unemployed, ensuring that both presidential candidates will head into their final debate Wednesday night armed with fresh plans to ease middle-class burdens.

Under the Republican's plan, seniors would pay lower taxes when they tap their retirement accounts, and people who sell falling stocks could write off more of their losses. Those who are out of work would no longer be taxed on the unemployment benefits they collect. And those who make a profit by selling long-held stocks would pay only half the capital gains taxes for the next two years.

"I will help to create jobs for Americans in the most effective way a president can do this -- with tax cuts that are directed specifically to create jobs and protect your life savings," McCain told a crowd of about 1,000 in suburban Philadelphia.

With less than three weeks before Election Day, McCain and his opponent, Sen. Barack Obama, have now both pledged to use the federal Treasury to help the Americans cope with the increasingly treacherous financial marketplace. As they campaigned through battleground states this week, both candidates said their goal was to make sure that struggling homeowners and small businesses get their fair share of the hundreds of billions that the government has authorized to stabilize the nation's economy.

"Instead of just propping up institutions deemed 'too big to fail' in this crisis, we will use more of this public money to help businesses and homeowners that may be too small to survive," McCain vowed Tuesday.

Obama proposed a $60 billion economic stimulus plan on Monday that also included tax breaks and other benefits for seniors and homeowners.

"If Washington can move quickly to pass a rescue plan for our financial system, there's no reason we can't move just as quickly to pass a rescue plan for our middle class that will create jobs, provide relief and help homeowners," he said in Toledo.

The Democratic nominee gave McCain's plan a mixed review, endorsing the Republican's idea to allow seniors to hold on to their retirement accounts until the stock market improves while dismissing his proposal to cut capital gains taxes.

"Nobody really has capital gains right now," Obama told reporters during a brief news conference. "So if the idea is to cut capital gains taxes, when I don't know anybody, even the smartest investors who right now are going to be experiencing a lot of capital gains, that probably is not going to be particularly useful in solving the financial crisis."

But, Obama added, "I'm sure that Senator McCain will have more to say about it tomorrow," when the two candidates meet for their third and final debate.

McCain and Obama will face off at Hofstra University in Hempstead, N.Y., in a 90-minute forum dedicated to the economy, making it all but certain that they will field questions about which of their plans would be better for voters.

McCain had proposed that the government use some of the $700 billion Wall Street rescue package to buy up troubled mortgages and refinance them, giving troubled homeowners another chance at solvency. And he had called for suspending rules that require seniors to begin withdrawing from their retirement accounts.

On Tuesday, he went further, saying that the government should commit new money to reduce the impact of wildly fluctuating stock prices on average people.

McCain made his tax-cut proposals as President Bush announced a $250 billion plan to have the federal government inject money into the economy by investing in private banks.

The Republican nominee did not directly comment on the announcement, but he warned that as president he would require that government investment end once the private banks and institutions are restructured and healthy.

"And when that is accomplished, in each instance, government will relinquish its interest in these private companies," McCain said. "We're going to get government out of the business of bailouts and equity stakes, and back in the business of responsible regulation."

Obama was more direct but offered only lukewarm support, along with multiple caveats, to the president's idea. He called the proposal "the right one," but added, "We must make sure this plan is implemented in a way that helps homeowners and does not enrich Wall Street CEOs at the taxpayers' expense."

In the three weeks since the economic crisis began, McCain and Obama have shadowed each other, responding by slowly rolling out proposals as stocks plunged and confidence in the economy ebbed.

Obama proposed a mortgage tax credit worth 10 percent of the mortgage interest a homeowner pays. And last week he suggested creating an emergency lending fund to make loans to small businesses.

On Monday, he added a temporary tax credit for firms that create jobs, a 90-day foreclosure moratorium for homeowners making "good-faith efforts" to keep up with their mortgage payments, and a new entity to lend to state and local governments.

The Democratic nominee also aimed some relief at those needing money from retirement accounts, allowing families to take out up to 15 percent of their savings up to $10,000 from 401(k) plans without penalty. And, like McCain, Obama called for the temporary elimination of taxes on unemployment insurance benefits.

On Tuesday, McCain was gloomy about the immediate situation but was optimistic about the future, saying the country will prosper and will be safer. He described his new proposals as an effort to "revive the market by attracting new investment."

Staff writer Shailagh Murray contributed to this report.

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