Election 2008: McCain on the Economic Issues
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.
• Labor Rights: McCain does not support the Employee Free Choice Act and has not received the endorsement of any of the most influential labor unions or labor organizations.
• Immigration: McCain calls for securing the borders, and requires employers to check workers' eligibility through a federal electronic employment verification system. McCain also favors temporary worker programs "that will reflect the labor needs of the United States…while protecting the employment opportunities for U.S. workers." Numeric caps for all categories of workers should rise and fall with market demand. Undocumented workers who clear background checks will have a path to citizenship.
• Work/Family Balance: McCain supported the Family Medical Leave Act in 1993 but has not said he supports its expansion. He supports measures allowing workers to bring their health and retirement benefits with them when they change employers.
• Minimum Wage: McCain has supported some efforts to increase the minimum wage and opposed others. He generally doesn't support efforts to raise the minimum wage that do not also include tax breaks for businesses.
McCain on Education
• Early Childhood Education: McCain proposes better coordination among federal early childhood programs. Wants to create "Centers for Excellence" in Head Start that will promote best practices and improve regional coordination of early childhood education. Says there should be measurable standards for school readiness and improved pay of instructors. Parental involvement will be emphasized.
• K-12 Education: McCain supports reauthorization of No Child Left Behind but with "reforms" and additional funding. Says there should be emphasis on standards and accountability but goal should be helping individual students and not "group averages." Will provide federal funds for private tutoring.
• Teacher Pay and Training: McCain proposes alternative certification methods to recruit highly motivated teachers and bonuses for high-performing teachers who work in underperforming schools. Says principals must have greater control over spending and will provide funds for teacher development. Wants to make it easier to remove bad teachers from classrooms.
• School Choice: McCain supports voucher programs and charter schools. Wants to expand Washington (D.C.) voucher program from $13 million to at least $20 million annually.
• School Funding: McCain suggests keeping education spending at current levels. Says that expenditures should be directed at programs that work.
• Classroom Technology: McCain will direct $500 million in current federal funds to build new virtual schools and support online class offerings for students. Will allocate $250 million to states to build "virtual math and science academies." Low-income students will get up to $4,000 to help pay for online tutoring and test preparation courses.
• Higher Education: McCain wants to provide more information to families for more informed higher-education choices. Proposes simplifying higher-education tax benefits and consolidating federal financial aid programs. Supports bank-based lending programs and proposes expansion of lender-of-last-resort capability for the federal student loan system.
McCain on Health Care
• His Approach: McCain wants to expand access to affordable health care by changing the tax code, unleashing greater competition in the insurance market, and creating incentives for higher-quality and more efficient health care.
• Coverage: McCain wants to eliminate tax exemptions for employer-provided health benefits, offset with a tax credit of $2,500 for individuals and $5,000 for families, which could be used to either pay into the employer's plan or buy insurance on the open market. He would also broaden access to health savings accounts.
• Insurance Changes: McCain wants to promote competition by allowing insurance to be sold across state lines, and work with the states to create a Guaranteed Access Plan that would extend coverage to people denied insurance by other plans, and offer subsidies to those with low incomes.
• Malpractice Reform: McCain would eliminate lawsuits against doctors who follow clinical guidelines and adhere to safety protocols.
• Drug Prices: McCain wants to allow re-importation of drugs and faster introduction of generics.
• Technology: McCain would promote greater use of 21st century information technology and systems that would allow doctors to share information on best practices and practice across state lines using telemedicine.
• Quality of Care: McCain would establish national standards for measuring and reporting treatments and outcomes, and change provider payments to encourage coordinated care rather than billing for each service.
McCain on the Financial Crisis
• Homeowners: McCain has proposed that the federal government should buy up "underwater" mortgages—loans where the owners owe more than the home is currently worth—and refinance them into a more affordable loan at the house's current value. Only owner-occupied homes where buyers made down payments and didn't commit fraud would be eligible. The proposal is a variation on several similar ideas that have won backing from Democrats or Republicans, but it could prove costly—the campaign estimates a $300 billion price tag—and would ultimately help lenders even where they had lent irresponsibly.
• Unemployment: McCain proposes exempting unemployment benefits from income taxes in 2008 and 2009, and has supported extending the benefits, which normally last 26 weeks. About 9.5 million Americans, or 6.1% of the workforce, were unemployed in September, and many economists expect the current economic downturn to throw millions more out of work, even if it doesn't worsen significantly.
• Jobs: McCain made a variety of tax proposals before this fall that were aimed at least in part at creating jobs, which has been a centerpiece of his campaign. (See "McCain on Taxes" above.)
• Other: McCain proposes allowing investors to deduct significantly more of their market losses from ordinary income for tax purposes. Current rules allow investors to deduct $3,000 of capital losses; he has proposed raising that to $15,000 for 2008 and 2009. Also proposed guaranteeing savings accounts of all sizes through the Treasury Dept.; currently the Federal Deposit Insurance Corp. guarantees $250,000 in deposits per person per bank, a temporary increase from $100,000.
McCain on Retirement
• Temporary Assistance: McCain has put forward several temporary measures to aid retirees and older workers amid the current economic downturn and financial crisis. He proposes reducing taxes on up to $50,000 withdrawn by retirees from their IRAs and 401(k)s during 2008 and 2009. He also proposes temporarily suspending rules that require retirees over 70½ to withdraw minimum annual sums from their retirement accounts, which vary by age and amount saved.
• Retirement Plans: McCain hasn't made specific proposals affecting individuals' retirement accounts.
• Taxes: McCain has proposed a general cut in long-term capital-gains taxes for stock sales to 7.5% from 15%. Although not aimed specifically at retirees, the move could encourage more long-term savings outside retirement accounts.
• Social Security: McCain supports supplementing Social Security with private investment accounts, using index funds similar to the investment options available under government-employee retirement plans. A bid by President George W. Bush to add individual accounts to Social Security during his first term was shot down in Congress. McCain opposes reducing benefits for workers nearing retirement.
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