By Scott Helman, Globe Staff
A day after Senator Barack Obama launched a broad assault on presidential rival John McCain's economic plan, McCain hit back today by asserting that Obama's tax proposals would ensnare millions of ordinary Americans and further weaken the economy.
McCain, speaking to small-business leaders in Washington, said that Obama's plans to restore higher tax rates to upper-bracket taxpayers, increase the capital gains tax rate for the richest families, and possibly raise the cap on Social Security taxes would affect not just the wealthy, but also moderate-income voters and independent businesses.
"Under Senator Obama's tax plan, Americans of every background would see their taxes rise -- seniors, parents, small business owners, and just about everyone who has even a modest investment in the market," McCain said at a small-business summit sponsored by the National Federation of Independent Businesses and eBay.
In a general election that will turn largely on the economy, it's clear this will be one of the major fault lines: Obama and Democrats will advocate, in his words, "restoring fairness to our economy" by shifting more of the tax burden to the rich, while McCain and Republicans will argue that an Obama presidency would also saddle more middle-class families with higher taxes on stock dividends and other earnings.
"Will we go back to the policies of the '60s and '70s that failed, or will we go forward?" McCain asked, seeking again to link Obama with former Democratic president Jimmy Carter, who presided over a period of high inflation, rising gas prices, increasing unemployment, and growing budget and trade deficits.
Obama and the Democratic Party, seeking to capitalize on the public's economic insecurity, note that those are precisely the afflictions of the current economy after nearly eight years under President Bush, and that McCain will merely continue -- or in some cases make worse -- that legacy.
In a wide-ranging interview that aired today on CNBC, Obama also pointed to the growing disparity in incomes between the highest and lowest earners, saying, "We've had an economy that's been out of balance for too long."
"We know that over the last decade or so, that more than half of the economic growth has been captured by the top 1 percent of US citizens," Obama said. "That means the other 99 percent have seen their effective incomes go down. That is not a recipe for long-term economic growth."
While he said in the interview that his specific prescriptions would depend on the economy he inherits, Obama also says he will institute a tax cut for 150 million middle-class workers -- up to $500 per person, or $1,000 per family; eliminate income taxes on seniors making less than $50,000; and provide a new mortgage-interest tax credit for low- and moderate-income homeowners.
McCain said today that keeping taxes low -- even on wealthy individuals and Fortune 500 corporations -- is the key to generating economic growth. He said he would double the tax exemptions for children and give millions of middle-class families a tax cut by phasing out the alternative minimum tax, a decades-old mechanism designed to make sure that affluent families pay at least some income taxes, but now affecting more and more taxpayers. He also vowed to slash the corporate tax rate, and the Republican National Committee noted today that even though Obama has slammed that idea, the Illinois senator's new chief economic adviser, Jason Furman, has advocated it.
The Arizona senator also told the small-business summit that he viewed the estate tax -- paid on inheritances -- as "one of the most unfair tax laws on the books." "After a lifetime building up a business, and paying taxes on every dollar that business earns, that asset should not be subjected to a confiscatory tax," he said.
But McCain has defended the estate tax in the past, arguing against its repeal in 2002 by saying doing so "would provide massive benefits solely to the wealthiest and highest income taxpayers in the country."
McCain's campaign said his position on what critics call the "death tax" has not changed. "He didn't indicate he supported a full repeal in this speech," his campaign said in a statement. Still, McCain's characterization of the estate tax today is a marked departure.
Democrats assailed McCain for asserting in today's speech that Obama would "enact the largest single tax increase since the Second World War" in part by not extending the Bush tax cuts. Factcheck.org, a nonpartisan website run by the Annenberg Public Policy Center of the University of Pennsylvania, found last month that that claim is inaccurate, saying that by the most accurate measure, it would be the fifth largest enacted since 1943.
During the speech, McCain was repeatedly heckled by antiwar protestors, interruptions he tried to overcome with pointed humor.
"One thing people are tired of in America is people yelling at each other. Have you noticed that?"
When the heckler continued, McCain added, "I'm running out of funny lines."
About Political Intelligence
Glen Johnson is Politics Editor at boston.com and lead blogger for "Political Intelligence." He moved to Massachusetts in the fourth grade, and has covered local, state, and national politics for over 25 years. E-mail him at email@example.com. Follow him on Twitter @globeglen.