McCain proposes tax breaks for businesses

January 17, 2008 2:59:49 PM PST
Despite calls in Washington for short-term economic relief, John McCain proposed a long-term economic plan on Thursday. It would lower the corporate income tax rate and provide a host of other tax breaks for business. "We will get through this rough patch, my friends," McCain told supporters.

The Republican presidential candidate proposed cutting the corporate tax rate to 25 percent from 35 percent. McCain, speaking to a rally under a tent in the rain, said that would expand the economy, creating jobs and opportunity.

He said his plan was "pro growth, less taxes and less spending." He contrasted it with "the Democrats' tired ideas of tax and spend."

McCain appeared to be resisting temporary economic relief for individuals, even as President Bush indicated support for a short-term boost and Federal Reserve Chairman Ben Bernanke called explicitly for it. Bernanke urged the government to adopt a plan quickly and make it temporary, and said "putting money into the hands of households and firms" would be more effective than measures such as making Bush's tax cuts permanent.

McCain adviser Doug Holtz-Eakin suggested the Arizona senator does not favor temporary relief at this time. "We haven't seen household declines in spending," he said.

McCain told reporters he would help finance the reductions with deep cuts in what he considers wasteful pork-barrel spending, starting with nearly 10,000 local projects, or "earmarks," totaling over $10 billion in spending legislation recently signed by President Bush.

As to calls by Bernanke and others for a temporary program of tax relief, McCain said, "It's not that I'm skeptical of short-term stimulus, I'm skeptical of any time you take taxpayers dollars without having a real good purpose and an object, Because somebody's got to pay it back.

"I want to see where that money's coming from."

McCain's plan would also establish a permanent research and development tax credit and allow tax breaks for equipment and technology investment. GOP rival Rudy Giuliani has also proposed cutting the corporate tax rate to 25 percent.

The McCain plan does not contain additional tax relief for individuals beyond previous proposals to repeal the Alternate Minimum Tax, a tax originally designed to fall on the wealthiest but which each year snags more middle-income taxpayers who claim a lot of deductions; and extension of expiring tax cuts from Bush's first term, a course also favored by others campaigning for the Republican nomination. "We've got to make these tax cuts permanent," McCain said.

"One of the reasons we have the difficulties we do is that spending went out of control," McCain said.

Among McCain's opponents in the South Carolina Republican primary Saturday, Mitt Romney said, "it makes sense for Congress to take immediate action" and he'd have his own plan soon. Fred Thompson, meanwhile, said it's not time for the government to give the economy a jolt.

McCain campaigned with Jack Kemp, a one-time star quarterback for the Buffalo Bills who represented New York in the House, served as housing secretary in the Reagan administration and was Bob Dole's vice presidential running mate in 1996. Kemp has long supported tax cuts as a way to stimulate business.

"John McCain knows we can prevent a recession," Kemp told the rally. "Everyone is talking about short-term stimulus. He wants long-term, pro-growth tax reform. I'm going to help him."