McCain calls for summer-long suspension of gas tax

PITTSBURGH - Republican Sen. John McCain on Tuesday called for a summer-long suspension of the federal gasoline tax and several tax cuts as the likely presidential nominee sought to stem the public's pain from a troubled economy.

Timed for the day millions of Americans filed their tax returns, McCain offered some immediate steps as well as long-term proposals in a broad economic speech. The nation's financial woes have replaced the Iraq war as the top concern for voters, and McCain, who has said economics is not his strongest suit, felt compelled to address the problems as he looks ahead to the November general election.

"In so many ways, we need to make a clean break from the worst excesses of both political parties," McCain told an audience at Carnegie Mellon University. "Somewhere along the way, too many Republicans in Congress became indistinguishable from the big-spending Democrats they used to oppose."

To help people weather the downturn immediately, McCain urged Congress to institute a "gas-tax holiday" by suspending the 18.4 cent federal gas tax and 24.4 cent diesel tax from Memorial Day to Labor Day. By some estimates, the government would lose about $10 billion in revenue. He also renewed his call for the United States to stop adding to the Strategic Petroleum Reserve and thus lessen to some extent the worldwide demand for oil.

Combined, he said, the two proposals would reduce gas prices, which would have a trickle-down effect, and "help to spread relief across the American economy."

Aides said McCain's Senate staff was drafting a bill on the proposal. It's likely to face strong opposition not only from Congress but the states. The federal gasoline tax helps pay for highway projects in nearly every town through a dedicated trust fund. In the past, such proposals for gas tax holidays have not fared well as lawmakers and state and local officials prefer not to see changes in their revenue source.

McCain's effort to set his own economic course — and court independents — comes as the public is craving change. A new television ad airing in parts of Pennsylvania and Ohio says "McCain will take the best ideas from both parties to spur innovation, invest in people and create jobs."

McCain has faced criticism — fueled by Democrats as well as his own previous comments — that his policy strength is not economics. Democrats have argued that his free-market approach is out of step with people feeling the pinch. And, McCain has taken heat on taxes; he twice voted against cuts President Bush championed, but now advocates making them permanent because, he says, doing otherwise would amount to a tax increase.

Shortly before McCain's speech, the Labor Department reported another worrisome sign for the economy: Inflation at the wholesale level soared in March at nearly triple the rate that had been expected as the costs of energy and food both climbed rapidly. Oil prices hit a new high, rising over $113 a barrel.

To immediately address concerns about gas prices and the fallout from the credit crunch, McCain offered the gas-tax suspension proposal and said the Education Department should work with governors to ensure that each state's guarantee agency — nonprofits that traditionally back student loans issued by banks — is able to be the lender of last resort for student loans.

In the long-term, McCain offered plans aimed at helping the middle class and eliminating wasteful spending, saying he wants to:

_Raise the tax exemption for each dependent child from $3,500 to $7,000. Aides estimated it would cost $65 billion over one year to double the tax exemption, but argued that McCain would offset such expenses by cutting federal spending.

_Require more affluent people — couples making more than $164,000 — enrolled in Medicare to pay a higher premium for their prescription drugs than less-wealthy people.

_Offer people the option of choosing a simpler tax system with two tax rates and a standard deduction instead of sticking with the current system.

_Suspend for one year all increases in discretionary spending for agencies other than those that cover the military and veterans while launching an expansive review of the effectiveness of federal programs. Aides estimated a one-year freeze would save $15 billion.

While he touched on a wide-range of issues, McCain did not discuss the soaring federal deficit or enormous war costs. He also offered few details for his new proposals and did not include estimated price tags. Later, aides said if all of McCain's tax plans are implemented, including those previously announced, the total cost would be $195 billion as changes are phased in. They said McCain has found — or would find — the same amount of spending reductions to match.

McCain also sought to draw a contrast with Democratic rivals Barack Obama and Hillary Rodham Clinton, saying they would impose the single largest tax increase since World War II by allowing tax cuts enacted in 2001 and 2003 — and that McCain, himself, opposed — to expire.

"All these tax increases are the fine print under the slogan of 'hope:' They're going to raise your taxes by thousands of dollars per year — and they have the audacity to hope you don't mind," McCain said, playing on the title of an Obama book.

McCain, who has lagged behind his Democratic rivals in fundraising, made the same argument in an e-mail appeal for money.

Obama campaign spokesman Bill Burton said McCain's proposals offer "no change from George Bush's failed policies by going full speed ahead with fiscally irresponsible tax cuts for the wealthiest Americans." Clinton policy director Neera Tanden called it "a George Bush-redux of corporate windfalls and tax cuts for the wealthy that will bankrupt our government and leave working families with the bill."

McCain made his remarks a day after he said he believes the country has already entered a recession.

18 cents does practically nothing to the cost of gas (drops from $3.40 to $3.22-$3.25, big whop, that’s about $2-$3 per tank of gas) and it’s about the only ‘fair’ tax there is. This won’t stimulate anything.

Supply isn't low, the dollar is.

Weak dollar is one factor. However, 70% of the cost of gas is the crude and demand for crude worldwide is very high. And it's gonna get higher.

Increasing demand further by artifically lowering the price for a few months will do what you think?

Love to see conservatives opposing tax cuts now.

I favor massive tax cuts on income and capital gains. I am not in favor of idiotic crap like this. Taxes on gas are basically use taxes which is the least odious taxes there are. Absent you owning the roads and letting me drive on them free of charge, I am relatively happy with the current arrangement if the fedguv would use those taxes as they should be used.

If McCain wants to cut taxes he can be my guest. Income, cap gains and death would be a good place to start accompanied by decreases in spending.

I This McCain Derangement Syndrom sure is taking its toll.

Maybe he'll suspend your tolls as well if you take care of the parkway gratis.

Weak dollar is one factor. However, 70% of the cost of gas is the crude and demand for crude worldwide is very high. And it's gonna get higher.

In a monopoly/cartel market such as oil,higher demand does not necessarily mean lower supply. Supply is being met and the increase in demand will be met. If there is any scarcity it's an artifice of OPEC.

Increasing demand further by artifically lowering the price for a few months will do what you think?

Has the huge increase in gas prices 'artificially' lowered demand? No. Then why do you think that lowering the price will increase demand? Oil is inelastic. In addition, the gas tax is the worst type of regressive tax that hits poor and working people hardest. At least the Clinton gas tax, which doubled the amount of tax paid (with no decrease in demand) should be repealed.

It's not a fair tax it's regressive. It causes inflation in food.

It puts unneeded money into an already bloated fedgov and does NOTHING to curb skyrocketing demand in China.

First of all demand in the short term is elastic. Secondly, this “tax cut” is a sham. It puts no significant money in anybody’s pocket. And thirdly, the tax isn’t regressive at all. People with more money burn off more petro. But I gotta tell you, the regressive argument doesn’t get you many points.

First of all demand in the short term is elastic.

Really? So when Clinton doubled the gas tax, demand must have dropped....NOT.

Secondly, this “tax cut” is a sham. It puts no significant money in anybody’s pocket.

Maybe, But it takes money away from the bloated fedgov. Which is good, don't you agree?

And thirdly, the tax isn’t regressive at all. People with more money burn off more petro.

It's the epitome of a regressive tax, people with less money still have to drive the exact same distance to work everyday. Their Demand doesn't fall due to price.

But I gotta tell you, the regressive argument doesn’t get you many points.

Not looking for any.

It's a use tax. You use gas, you help pay for the roads. The federal tax hasn't gone up in a long time so no it doesn't cause food inflation.

Decreasing the tax does NOTHING to curb skyrocketing demand in China either.

There are far better things our elected leaders could do to boost the economy OR drop oil prices. The gas tax at this point is almost irrevelent. With RBOB at $3/gallon, add tax and 5-10% profit, and we're looking at $4 gas soon. Taking 18.4 cents off does nothing.

Clinton doubled the tax in '93. The stated reason was to bring down the deficit, and cure global warming. Not fix the roads.

We still are paying it, we haven't cured global warming, and we've got huge deficit. I want a refund.

When gas was .25 cents a gallon, and we still building roads, how did we pay it?

The roads are all built, why do we need such excessive taxes merely to maintain them...if you like 'use tax' then put up tolls.

Actually Clinton raised the gas tax 4.3¢, which was about 30%. I can tell you at this point I can not even feel 4.3¢. Roads are very, very expensive to maintain. I know from personal experience from previously living on a private road. I’m perfectly fine with reducing the gas tax to whatever is required to fix, maintain and build new roads. Tolls are inefficient, cause more gas use, etc etc. We’d be better off cutting capital gains taxes or corporate tax rates than lowering the gas tax or eliminating it for 3 months. It would help boost the dollar for starters which would make gasoline cheaper in and of itself that way.

Roads are expensive to maintain, but not THAT expensive: it's corruption. How do I know? I'm from Boston, land of the "BIG DIG', known to local paving companies as the "gravy train".

It would help boost the dollar for starters which would make gasoline cheaper in and of itself that way.

Agree, anything that boosts the dollar will be a great help.

If Bernanke were to announce a 5 year plan to re peg the dollar to gold, just that announcement would send the dollar soaring. Problem solved.

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