McCain proposes break in gas taxes

PITTSBURGH (KGO) -- On the campaign trail Tuesday, John McCain laid out his proposals for fixing a slumping economy and, as expected, it was heavy on tax cuts.

We've got a wealth of economic experts here in the Bay Area. Among them a senior economic advisor to Sen. John McCain (R) of AZ, one of the people who put together this economic package that McCain unveiled this morning.

In Pittsburgh Tuesday morning, John McCain acknowledged government spending is out of control, but the focus of his speech was tax breaks.

"As it is we have the second highest tax on business in the industrialized world. High tax rates drive businesses and jobs overseas," said McCain.

McCain's solution is to drop corporate income tax from 35 percent down to 25 percent, and at the same time offer help to Americans who are in trouble with their mortgages.

"In place of your flawed mortgage loan, you'll be eligible for a new 30 year fixed rate loan backed by the United States Government," said McCain.

He also wants to double the exemption for dependents from $3,500 to $7,000 dollars each. He also wants a middle class tax cut, to phase out the alternative minimum tax, ban internet taxes altogether, and he'd like to suspend the federal gas tax from Memorial Day to Labor Day this summer.

"The effect will be an immediate economic stimulus taking a few dollars off the price of a tank of gas, every time a family, a farmer, or a trucker stops to fill up," said McCain.

"Well it sounds like a program that mostly is going to result in a large number of tax cuts," said James Wilcox.

Wilcox is an economics professor at U.C. Berkeley and a senior economist on the President's Council of Economic Advisors under the first President Bush. He says McCain's plan is short on how to pay for those tax cuts.

"The kinds of specific cuts on the spending side are no where near as large as the specific cuts on the tax side," said Wilcox.

We heard something similar from Economist Raj Chetty, whose specialty is studying the role of the government on the economy.

"If we're really going to cut taxes to the tune of $300 billion a year, where do we get that 300 billion from?" said Chetty.

Especially if we're already running a defect and spending hundreds of billions a year on the war in Iraq.

"Well I think it's a good plan actually," said Stanford economics professor John Taylor. He helped craft the McCain proposals, he's a senior economic advisor to the campaign.

"His focus now is to get back to vetoing the earmarks. He's pledged he will not accept a bill that has earmarks in it that's huge, that's a big deal," said Taylor.

But McCain's proposal to cut all earmarks, might sound good in proposal, but it's hard to do in practice.

"If you literally veto every bill that has an earmark associated with it, you might veto everything," said Chetty.

Last January Mitt Romney was attacking John McCain as a Washington insider who didn't have real world economic experience. Tuesday Romney praised John McCain, saying he has been working on economic policies since the days of Ronald Reagan. Romney has been mentioned as a possible running mate and that's politics.

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