Republican presidential candidate Sen. John McCain proposed a more-expansive economic recovery plan Tuesday that would slash the capital gains tax, suspend taxes on unemployment benefits and guarantee 100 percent of all savings to boost confidence in the banking system.
Stepping up his attacks on Sen. Barack Obama as a high-risk candidate who "is going to raise your taxes" and turn a "recession into a depression," the Arizona Republican added $52.5 billion in new proposals to his economic agenda that included deeper tax cuts and rule changes aimed at investors, retirees, unemployed workers, businesses and pension plans.
A day after Mr. Obama, the Democratic presidential nominee, offered a new $60 billion package, Mr. McCain called for cutting the 15 percent capital gains tax in half for two years as an incentive to save and buy stocks and property that he said would "raise asset values, help companies and shore up the pension plans for workers." Among his other proposals announced in a speech at Montgomery County Community College in Blue Bell, Pa.:
• Order the U.S. Treasury to guarantee 100 percent of all savings for six months to "restore trust to our financial system" and "calm the understandable fears of widespread bank failure."
• Suspend current rules that require retirees to begin withdrawing money from their Individual Retirement Accounts and 401(k) plans at age 70 "to spare senior citizens from being forced to sell their stocks just as the market is hurting them most."
• Lower the tax rates on IRAs and 401(k) plans to 10 percent on the first $50,000 withdrawn, a change that the McCain campaign said would affect 9 million people over the age of 60.
• Temporarily suspend the income tax on unemployment benefits now going to 3.6 million Americans to boost worker incomes during jobless periods. The McCain campaign said this would raise their incomes by an average of 10 percent.
• Increase the amount of capital losses from $3,000 to $15,000 that taxpayers can deduct from their income in 2008 and 2009. "We should not penalize Americans who are forced to sell investments in today's tough market," Mr. McCain said.
Mr. Obama on Monday called for a temporary tax credit for companies that create new jobs, and penalty-free withdrawals from IRAs and 401(k)s similar to Mr. McCain's plan.
The freshman senator, who sharply criticized Mr. McCain's proposal for the government to buy up bad subprime mortgages, told reporters Monday that Mr. McCain's latest plan "had some good ideas" in it. "I think the idea of making sure that people aren't forced to sell their 401(k) or IRA accounts at the age of 70 when the market is in the tank ... makes sense," he said.
But Mr. Obama, who wants to raise the capital gains tax to more than 20 percent, rejected Mr. McCain's capital gains cut, saying, "I don't know anybody, even the smartest investors who right now are going to be experiencing a lot of capital gains."
Republican tax cutters, however, cheered Mr. McCain's temporary capital gains proposal as a needed move to encourage investing in the economy to fuel business expansion and new venture capital formation.
"McCain's proposal to temporarily halve the capital gains tax provides a stark contrast to Obama's plan to raise it by five percentage points," said Cesar Conda, an economic consultant who was Vice President Dick Cheney's chief domestic policy adviser.
"It should, however, be a permanent tax cut. Regardless, McCain's plan provides the right medicine to our ailing stock market because it will immediately boost equity values," he said.