McCain Sees Obama on the Economy, Raises Stakesby
In a speech today in Blue Bell, Pa., John McCain added some planks to his economic platform: more government guarantees for bank deposits, and tax cuts for the unemployed and for investors, including retirees.
Update: Douglas Holtz-Eakin, McCain’s head economic adviser, says the total price-tag of the new proposals would be $52.5 billion over two years. We’ve appended individual price-tags to several of the descriptions below.
McCain proposed cutting the long-term capital-gains tax rate for stocks in half, from 15% to 7.5%, which he called part of a plan to “revive the market by attracting new investment,” according to the text of prepared remarks. “This vital measure will promote buying, raise asset values, help companies and shore up the pension plans for workers and retirees.” Cost: $10 billion
He said investors who lose money in the recent market rout should also be able to deduct more of those losses from ordinary income for tax purposes. Current rules allow investors to deduct $3,000 of capital losses; he proposed raising that to $15,000 for 2008 and 2009, blaming “so much of this decline in our markets” on the administration and Congress for failing to “come out with a timely rescue package.”
For investors over 60, he proposed reducing the tax on 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. "Retirees have suffered enough and need relief, and the surest relief is to let them keep more of their own savings," he said. Cost: $36 billion
He proposed exempting unemployment benefits from taxes for 2008 and 2009 as well. "We should relieve this burden from Americans who've been hit the hardest," he said in his prepared remarks. Cost: $6.5 billion
McCain also was to propose having the Treasury Department "guarantee one hundred percent of all savings accounts for a period of six months." In the remarks, he said, "This will calm the understandable fears of widespread bank failure."
He also reiterated several existing proposals, including a plan to buy up and modify the terms of a broad swath of mortgages, and one to temporarily suspend rules requiring retirees to withdraw a minimum amount from their accounts each year. He blasted a proposal from Barack Obama yesterday that would temporarily waive penalties for investors who make withdrawals before retirement, calling it "an invitation to capital flight."
The mix of proposals comes a day after Barack Obama offered a four-point economic plan.
McCain's proposal to run the additional savings guarantee through the Treasury extends a departure from existing U.S. deposit insurance, which has been handled for 75 years by the Federal Deposit Insurance Corp. and is primarily funded with fees from banks thrifts. The Treasury is temporarily guaranteeing investments in money-market funds as part of its efforts to address the financial crisis. It is unclear whether the new proposal would be funded with tax dollars or fees of some kind.