ABC News’s Bret Hovell, Tahman Bradley and Teddy Davis Report: Sen. John McCain, R-Ariz., laid out a strategy to address the struggling U.S. economy Tuesday, proposing to double tax exemptions for dependents, and to ask higher income retirees to pay more for their prescription drugs under Medicare.
The plan, which was announced at Carnegie Mellon University in Pittsburgh, Pa., was billed by McCain’s campaign as a longer-term strategy for helping Americans hurt by the slowing economy. It comes less than a week after McCain proposed some shorter-term economic goals in a speech in Brooklyn.
McCain proposed doubling the tax exemption for dependents, to $7,000 from $3,500, which could lower taxes on a large swath of the middle class.
"Mothers and fathers bear special responsibilities, and the tax code should recognize this," said McCain.
The campaign estimates that doubling the dependent exemption would cost about $65 billion annually.
McCain’s proposed changes to Medicare would require higher-income seniors to pay more in Medicare premiums for their prescription drugs. That plan is estimated by the campaign to save about $400 million dollars each year.
McCain did not specify who among affluent seniors would be hit by higher drug premiums. But McCain spokesman Brian Rogers told ABC News that the Arizona senator’s proposal would begin to be phased in for seniors making $80,000 or more.
McCain also proposed a gas tax holiday between Memorial Day and Labor day of this year, eliminating the 18 cents per gallon federal levy that consumers pay for a gallon of gasoline during the busy summer travel months.
That is expected to cost between $8 billion and $10 billion dollars, but would only be a one time expense.
Taken as a whole, McCain’s economic plans – which include ending the alternate minimum tax, reducing the corporate tax rate from 35 percent to 25 percent, and implementing first-year expensing of new equipment and technology — would cost the federal government, according to the McCain campaign, $195 billion dollars in revenue. The McCain campaign says that that total would be offset by spending cuts and the elimination of pork barrel spending. McCain would also implement a one year moratorium on discretionary spending. That would save $15 billion for that year.
McCain is also in favor of maintaining the tax cuts proposed and signed by President Bush, tax cuts he originally opposed. The campaign claimed that the cost of those tax cuts would not be taken into account, because they are not factored in to the current budget.
McCain’s proposal drew a swift rebuke from the Center for American Progress, a liberal think-tank which has taken the lead for the Democrats in offering critiques of McCain’s policy prescriptions.
"The bottom line is that the McCain campaign estimates that all these tax cuts together costs about $195 billion a year," said James Kvaal, a domestic-policy expert with the liberal Center for American Progress. "We would put the number closer to $300 billion a year."
The key difference between McCain’s estimate and the one prepared by the Center for American Progress is that the Arizona senator has estimated that there would be no cost associated with his corporate investment incentives while C.A.P. estimates that it will cost $75 billion per year.
C.A.P.’s Robert Gordon criticized McCain’s doubling of the tax exemption for dependents, saying that it was a less progressive approach than the one pursued by President Bush.
"As tax breaks for families go, [it's] a highly regressive tax break," said Gordon. "It compares unfavorably with President Bush’s expansion of the child tax credit. Expand[ing] the child tax credit is worth $500, for everyone who owes $500 in income taxes."
By contrast, he added, "when you expand a deduction or an exclusion, which is what Sen. McCain has done, it’s worth much more to people in higher brackets. So this is a proposal that is worth more than twice as much to someone earning a million dollars, more than twice as much to Carly Fiorina," [the former Hewlett-Packard CEO and current RNC Victory Chairwoman] "as it would be worth to her secretary."