Election 2008: McCain on the Economic Issues

Republican Presidential nominee Senator John McCain on taxes, jobs, education, health care, the financial crisis, and retirement

By Jane Sasseen, Moira Herbst, Phil Mintz, Catherine Arnst and Theo Francis

McCain on Taxes

• Income Taxes: Senator John McCain (R-Ariz.) would make permanent all of the Bush tax cuts on income earned by individual taxpayers. McCain argues that he would keep all of today's rates in effect—though, since the return to earlier rates is automatically mandated by current law, he would have to get the Democratic Congress to agree to go along with his plans and pass new legislation extending the cuts. That promises to be a tough task.

• Estate Taxes: McCain would fix the tax rate permanently at 15% on estates over $5 million. In 2009, estates of up to $3.5 million will escape taxation, and the inheritance tax is supposed to disappear altogether for one year in 2010, before returning again in 2011 on estates over $1 million. No one believes most of those changes will actually happen, however; fixing the estate tax is expected to be among the first tax issues a new Administration will have to tackle.

• Capital-Gains Taxes: McCain has proposed in recent weeks cutting the long-term capital-gains tax rate for stocks in half, from 15% to 7.5%. The goal? To jump-start investment and, with it, the economy. Under Bush, capital-gains rates were trimmed from a maximum rate of 28% in the late '90s to 15% in 2003. Taxes on dividends were also pared so that the two are treated equally.

• New Tax Cuts: McCain has proposed far fewer small measures targeted at specific niche groups within the economy, targeting most of his cuts to business. But one move would clearly add some heft to the family wallet: McCain would double the deductions that can be taken for children and other dependents, to $7,000.

• Economic Stimulus: McCain would start with trimming capital-gains rates to get the economy going again. Then he'd offer more help to troubled investors. He recently proposed allowing investors who have lost money in the market to deduct more of those losses from ordinary income for tax purposes. He proposed raising the amount investors can deduct from $3,000 of capital losses to $15,000 for 2008 and 2009. For investors over 60 who need access now to their retirement stash, he proposed reducing the tax on the first $50,000 of withdrawals from Individual Retirement Accounts, 401(k)s, and similar vehicles to 10% this year and in 2009; currently, ordinary income taxes apply after retirement. And to ease the hardship of those who have lost their jobs, he proposed exempting unemployment benefits from taxes for 2008 and 2009 as well.

• Business Taxes: McCain would like to see a hefty cut in the corporate tax rate to boost the competitiveness of U.S. business. He would trim the maximum corporate income tax rate from 35% to 25%. To bolster investment, he would speed up the deductions allowed for business spending and the purchase of equipment; he also favors making the research and development credit permanent, up to the value of 10% of the wages a company spends on research. He would also ban taxes on the Internet along with new taxes on cell phones.

McCain on Jobs

• Job Creation: McCain wants to cut the corporate tax rate from 35% to 25%, suggesting such a move will attract companies and jobs to the U.S. He wants a permanent tax cut equal to 10% of wages spent on R&D as an incentive to innovate.

• 'Green' Jobs: McCain is not in favor of jobs initiatives from the federal government. Instead, he says he wants tax relief for small businesses and startups by eliminating all capital-gains taxes on startups and small businesses.

• Unemployment: McCain says he will overhaul unemployment insurance and make it a program for retraining, relocating, and assisting workers who have lost a job.

• Trade: McCain wants to lower barriers to trade through multilateral, regional, and bilateral efforts. He says he'll push to ratify free-trade agreements with Colombia and South Korea.