Borrowing heavily from Democratic philosophy, Sen. John McCain on Tuesday unveiled a decidedly independent tax-relief plan that would pinch corporations and the well-to-do to reduce the tax burden on moderate-income Americans.
But the U.S. senator from Arizona hewed closer to traditional GOP thinking in proposing expanded investment savings accounts as well as privatizing Social Security.
His five-year, $237 billion tax program would be funded partly by ending more than 50 tax preferences worth an estimated $151 billion to corporations and wealthy individuals.
McCain’s tax-relief package is smaller than those of his Republican presidential rivals, including Texas Gov. George W. Bush, but for what it lacks in size, it more than makes up with chutzpah by attacking many of the prized tax loopholes won by GOP forces over the years.
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Not only would he close oil and gas industry tax preferences, he also would shut off an ethanol tax break popular in Iowa and loopholes for vacation homes.
McCain pledged to soften the tax penalty on married couples, slash the inheritance tax, double the $500-per-child tax credit, permanently ban sales taxes on Internet purchases and end the earnings penalty for working senior citizens.
He called his proposal a “vision of a new fiscal conservatism for the new century” in a 40-minute speech to the Concord, N.H., Chamber of Commerce.
Like several of the other GOP candidates, McCain proposed introducing a private element to Social Security by allowing people to invest at least 20 percent of their Social Security savings in private retirement accounts.
While many of the details of his privatization plan haven’t been fleshed out, his fact sheet said workers should be allowed to choose between the current Social Security system and private retirement accounts. The statement implied that McCain would allow Americans to opt out of the system entirely, an idea that President Ronald Reagan once proposed and then dropped.
But McCain occasionally sounded like President Clinton. The senator, who was endorsed Tuesday by newspapers in the wealthy New Hampshire communities of Portsmouth and Exeter, hammered home his belief that the federal budget surplus should be used “wisely,” not only for tax cuts but for reducing the national debt and ending the “ticking time bomb” of the threatened bankruptcy of the Social Security Trust Fund and Medicare.
McCain’s individual tax cuts would be targeted to people earning less than $100,000 a year, unlike those of many of the GOP challengers. His chief proposal would expand the 15 percent tax bracket to couples with taxable income of $70,000, up from $43,050 currently, and to $35,000 for singles, up from the current $25,750. He said such a change would allow an additional 25.4 million Americans to enter the lowest tax bracket.
Overall, he said, “Under my plan, 85 percent of America will pay no tax or have a flat tax at our lowest rate of 15 percent.”
Bush called the McCain plan inadequate in this regard. “If you simply expand the 15 percent tax bracket, there are a lot of people who are not going to get tax relief,” the governor said during an appearance in Charleston, S.C.
The senator also would raise the $500 per child tax credit to $1,000 by 2002 and reduce the “marriage penalty” in the tax code by raising the standard deduction for couples to $8,600 from $7,200 over five years, so that it would be twice that of single filers.
In addition to Social Security, McCain’s plan contains another proposal involving private investment: a Family Security Account into which families can place up to $6,000 tax deferred annually. As long as the money is saved for at least one year, he said, the savings and interest can be withdrawn after that period, for any purpose, without penalty.
Asked whether such savings might be an overly optimistic goal for lower- and middle-income families, McCain said, “I don’t think so.” Historically, he said, “large numbers of Americans at that income level” do invest in IRA or 401k savings accounts.
Bush’s advisers disagreed, saying that a small fraction of low- and middle-income Americans take full advantage of such provisions.
McCain also proposed eliminating income taxes for military personnel overseas and pledged to get some 12,000 members of the military off food stamps..