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McCain set to unveil tax plan
January 10, 2000 WASHINGTON (CNN) -- After weeks of sparring with George W. Bush over the role for tax cuts in a time of prosperity and a federal budget surplus, Republican presidential candidate John McCain plans to outline his tax plan Tuesday, making the case that the federal budget surplus should be used to cut taxes, bolster Social Security and Medicare and reduce the national debt. "It's fiscally irresponsible to promise a huge tax cut that is based on a surplus that we may not have," McCain said during last week's GOP debate. McCain is swimming against current Republican orthodoxy by saying the majority of the surplus shouldn't be used for a tax cut. It also an argument that Democrats have used in the past against Republican tax cuts.
This year, McCain is using it against Bush, the Republican front-runner. Bush has proposed a $483 billion tax cut, twice the size of McCain's cuts. The Arizona senator is making the case that the Bush proposal simply promises too much. McCain's plan would assume that the government would have a non-Social Security surplus of $500 billion over the next 10 years, and would dedicate 62 percent of that surplus to shoring up Social Security. The Social Security program is forecast to begin running a deficit in 2014. Another 10 percent of the surplus would go to preserving the Medicare program and 5 percent would go to national debt reduction. The remaining 22 percent, coupled with closing various corporate tax loopholes, would provide the revenue for a tax cut targeted at low and middle-income Americans. The total tax cut would be about half of Bush's proposal -- $240 billion over five years, rather than the $483 billion over five years advocated by Bush. Bush wasted no time in taking a shot at McCain's plan, noting McCain put forward a tax plan last year. McCain aides said Tuesday's speech will detail McCain's official proposal as last year's tax comments were in conjunction with the ongoing congressional debate over tax cuts and the federal budget. "I look forward to hearing what version two is and perhaps we ... need to quote Regis to him and say, 'Senator, is this your final tax plan,'" Bush said Monday to reporters in New Hampshire, referring to the popular game "Who Wants To Be a Millionaire." Bush's tax cut comes from cutting the existing five marginal tax rates down to four, with the highest rate being 33 percent rather than the current 39.6 percent. McCain advocates a "bottom up" flat tax that would allow taxpayers with incomes up to $70,000 to file at the 15 percent rate -- up about $28,000 from current law. McCain advisers say that will provide tax relief to an additional 25 million taxpayers. Both Bush and McCain have disagreed over whose plan offers more relief to working Americans. Bush says that under his plan, some 6 million people will no longer pay any income taxes. McCain argues that his plan would offer greater relief to more Americans, without rewarding high-income earners the most tax relief as he claims Bush's plan would. Bush is fighting back with a brand new commercial warning against giving politicians too much control of the budget surplus. The ad never mentions McCain by name but it's clearly directed against him. In the ad, Bush says the budget surplus may even be larger than anticipated. "That makes the idea of having a paltry tax cut even more risky," he said. Unlike McCain, Bush would also cut taxes for the rich. The Bush plan gives the wealthiest 1 percent of Americans a 15 percent cut. But Bush's plan also includes cuts for low and middle-income Americans, as he noted in last week's GOP debate in South Carolina. Other components of McCain's plan will be an increase in the child tax credit -- from $500 to $1,000 over two years; reducing the marriage penalty by increasing the standard deduction from $7,200 to $8,600 per year; and reducing the Social Security earnings penalty and inheritance penalty. The plan would also offer several incentives for saving. One would be the creation of a "family security account," modeled on an IRA. Taxpayers could invest up to $3,000 apiece ($6,000 for a couple) into tax-deferred accounts that can be used after one year for any purpose. He would also allow taxpayers to invest up to 20 percent of their FICA payroll tax in private accounts. Other savings measures would be expanding existing medical savings accounts and educational savings accounts. McCain also calls for a permanent ban on Internet taxation. Bush supports the current moratorium but has not yet said whether he would favor a permanent ban. But even as Bush moves to the right of McCain on taxes, magazine publisher Steve Forbes is trying to move to the right of Bush, in the first true attack ad of 2000, which focuses on Bush's record as the governor of Texas. The ad quotes a Texas woman, Mary Williams of Houston-based Taxpayers for Accountability, as saying Bush signed a pledge in 1994, when he first ran for governor, not to support increasing sales or business taxes. But in 1997, the ad says Bush broke the pledge by proposing an increase in business tax and sales taxes The ad is correct in saying that Bush supported the increases but it was to offset a $3 billion cut in property taxes. The actual legislation was never enacted by the Texas Legislature. Bush also has historical baggage to deal with. Bush's father was roundly criticized for breaking his famous "read my lips -- no new taxes" promise in 1990 when he was president. But that was at a time of deep recession. The junior Bush is now banking on a big surplus to help him keep his promise, which he reiterated last week. "This is not only no new taxes, this is tax cuts, so help me God," Bush said during a previous GOP debate in New Hampshire. CNN's Beth Fouhy and Frank Sesno contributed to this report. |
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MORE STORIES:Monday, January 10, 2000
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