June 10 (Bloomberg) -- Barack Obama, seeking today to dispel John McCain's claim that his proposals would burden all types of taxpayers, said his proposed tax increases for wealthier Americans would depend on economic conditions.

``I can't predict yet where the economy is going to be'' next year, Democratic presidential contender Obama said during a news briefing in St. Louis. ``So it would be foolish for me to say I've got my economic plan and we are going forward with it regardless of what circumstances are.''

The Illinois senator defended his economic plans an hour after Republican presidential rival McCain told a national small-business conference that Obama's proposals to raise dividend and capital gains taxes would result in tax increases for Americans of all backgrounds.

``Seniors, parents, small-business owners and just about everyone who has even modest investment in the market'' would see a tax increase, McCain, an Arizona senator, told the National Federation of Independent Business in Washington.

Obama shot back that his tax plan ``would cut taxes for 95 percent of workers.''

On capital gains, Obama suggested that he wouldn't boost the tax rate above about 20 percent, the same limit former rival Hillary Clinton, a New York senator, proposed. Earlier this year, Obama declined to make such a pledge.

Impact on Employers

McCain, in his speech, said small business is crucial to creating jobs ``in this very tough time'' for the U.S. economy.

``I intend to keep the current low income and investment tax rates,'' he said. ``And I will pursue tax reform that supports the wage-earners and job-creators who make this economy run.''

He said Obama's plans would subject 21.6 million small- business owners to income-tax increases.

``Americans of every background would see their taxes rise,'' McCain said.

Obama said he doesn't seek to raise taxes to the point of hurting employers.

``This notion that John McCain is peddling, that somehow Democratic candidates are interested in tax and spend is just not true,'' Obama said. ``You can get to a point where taxes are so burdensome on businesses that it inhibits their investment and plants and equipment, research and development, but nobody is talking about huge shifts in our tax system.''

Obama noted that investors including Warren Buffett have indicated that a capital gains tax rate of as much as 20 percent ``will probably not have any significant impact in terms of investment.''

Middle-Class Squeeze

At the same time, Obama stressed that the middle class is in desperate need of tax relief because of escalating costs and stagnant wages.

``Over the last decade or so, up to three-quarters of economic growth in the U.S. was captured by the top 1 percent,'' he said. ``What we are trying to do is restore some balance and put some money in the pockets of working families and consumers.''

Obama said this will benefit businesses because people will have more spending money.

Working Americans must also benefit from a growing economy ``if we are going to avoid a deep, long recession,'' Obama said.

McCain, who voted against President George W. Bush's tax cuts in 2001, said in a Bloomberg Television interview this afternoon that the economy has become ``the transcendent issue'' for the country.

``We all know how badly Americans are hurting,'' he said. He also renewed his criticism of Obama's plan.

``Senator Obama wants to raise taxes. I want to keep tax cuts in place,'' McCain said. ``In a time of real crisis, real economic crisis, the last thing we want to do is raise taxes.''

Paying the Tab

The two candidates also differ over how to pay for tax relief.

Obama claims McCain is touting an additional $300 billion in tax cuts for the wealthy and ``hasn't even come remotely close'' to explaining how he would pay for it. When asked how he proposes paying for his own plan, Obama said that his campaign has been more detailed, though acknowledged that he hasn't offered a ``line-by-line'' budget.

``But we have identified revenue sources whereby we would pay for our proposals,'' he said.

McCain says the way to cut spending is to eliminate ``pork- barrel'' projects, criticizing both political parties for legislation that aids specific industries. In his speech, he cited as an example the most recent farm bill, which Congress passed over the veto of President George W. Bush.

`Special Pleaders'

``On my watch there will be no more subsidies for special pleaders, no more corporate welfare, no more throwing around billions of dollars of the people's money on pet projects while the people themselves are struggling to afford their homes, groceries and gas,'' he said.

Obama, who struggled in the primary campaign against Clinton to attract lower-income, blue-collar workers, yesterday began a two-week tour of tightly contested states including Missouri and Florida to tout his plan for reviving the economy.

Today, he received the endorsement of the 1-million-member United Auto Workers Union, whose support may boost his November chances in Michigan and Ohio.

``Barack Obama has been a voice for dignity and justice for working people,'' UAW President Ron Gettelfinger said in an e- mailed statement. ``He has a strong program for a safe and secure America.''

To contact the reporter on this story: Kim Chipman with the Obama campaign in St. Louis at kchipman@bloomberg.net.

Last Updated: June 10, 2008 18:42 EDT