Obama backs tax rebates to help pay energy costs

ST. PETERSBURG, Florida (Reuters) - U.S. Democratic presidential candidate Barack Obama proposed a package of measures on Friday to help workers fight rising energy costs, including an immediate $1,000 tax rebate for low- and middle-income families.

Obama, trying to shift the focus of his campaign debate with Republican rival John McCain back to the economy, said he would pay for the $65 billion tax package with a 5-year windfall profits tax on oil companies.

The Illinois senator also revamped his proposal for a $50 billion economic stimulus plan to include $25 billion to replenish the highway trust fund and pay for infrastructure improvements that he said could save up to 1 million endangered jobs.

"With job losses mounting, prices rising, increased turbulence in our financial system, a growing credit crunch, we need to do more," Obama said at a town hall meeting in St. Petersburg, Florida.

The proposals came as the government announced the U.S. unemployment rate hit its highest level in four years with another 51,000 non-farm jobs lost in July, bringing job losses for the year to 463,000.

"Do you think you can afford another four years of the same failed economic policies?" Obama asked, accusing McCain of embracing President George W. Bush's economic approach.

The tax rebates, which would be phased out for those making more than $150,000 a year, are an accelerated version of Obama's earlier proposal for permanent tax reductions of up to $1,000 for working families, aides said.

"You can't afford to wait for relief. Right now, people are suffering," Obama said.

A spokesman for McCain said the Arizona senator's approach to fighting energy costs, including new offshore oil drilling, more nuclear power plants and gas tax relief, was better than raising taxes on oil companies.

"The higher taxes that Barack Obama supports are one of the surest ways to kill jobs and exactly the wrong approach to a slowing economy," McCain spokesman Taylor Griffin said.

Obama said the proposals grew from his talks this week in Washington with economic officials and an all-star panel of economic advisers including billionaire investor Warren Buffett.

"We agreed that the main risk we face today is doing too little in the face of our growing economic troubles," he said.

DUELING MCCAIN

Obama, who would be the first black U.S. president if he wins the November 4 election, spent the last two days dueling with McCain in a series of increasingly negative attacks.

McCain's campaign charged Obama was playing "the race card" by claiming McCain would try to scare voters about Obama's candidacy. McCain also aired a television advertisement earlier in the week comparing Obama to Hollywood celebrities like Britney Spears and Paris Hilton.

"The American people deserve better," Obama said in St. Petersburg. "They want a serious conversation about the challenges we face."

Obama said his $50 billion stimulus package would help jump-start new jobs. Half would go to help pay for infrastructure projects that have been put on hold, threatening jobs.

House Speaker Nancy Pelosi, a California Democrat, also has discussed the possibility of a $50 billion stimulus bill, which the Bush administration so far opposes. On Thursday, she said a new round of tax rebates could be part of the formula.

Obama announced the proposals at the start of a daylong bus tour across central Florida to focus on the economy, which polls show is the top issue among American voters. Florida, the state that decided the 2000 election that landed Bush in the White House, promises to be a crucial battleground again.

Obama already had proposed a windfall profits tax on oil company profits but the new plan specifies the tax would last five years. He linked his call for a windfall profits tax to Exxon Mobil's announcement on Thursday of nearly $12 billion in profits for the quarter.

"It's time we used some of their record profits to help you pay record prices," he said.

(Editing by Jackie Frank)