Obama fights McCain over taxes

KAUKAUNA, Wisconsin (Reuters) - Democratic presidential hopeful Barack Obama on Thursday accused Republican John McCain of mischaracterizing his tax plan and said most Americans would not see taxes go up.

Obama, an Illinois senator, has drawn heavy fire from rival Arizona Sen. McCain this week on the issue of taxes, with the Republican repeatedly accusing Obama of seeking the largest increase since World War Two.

"It's just not true," Obama said at a town hall meeting in rainy Wisconsin, telling a crowd inside a high school gymnasium that Republicans have wrongly subjected him to charges of being a "tax-and-spend liberal."

Obama, visiting a Midwestern state likely to be a battleground in the race to the November presidential election, is enjoying a modest bump in public opinion polls in the days since dispatching rival Hillary Clinton from the Democratic nominating contest.

A poll by NBC and the Wall Street Journal put him ahead of McCain by 47 percent to 41 percent among registered voters.

Obama says he would raise taxes on Americans making $250,000 a year or more and raise the capital gains tax for those in higher income brackets while exempting small investors. He would use the money to pay for a middle-class tax cut of $1,000 a year.

McCain and other Republican leaders argue that any tax increase at a time the U.S. economy is struggling could be devastating.

Obama's campaign pointed to a study by the Tax Policy Center that said his plan would offer middle-class families three times the tax relief that they would receive under McCain's plan.

The report said McCain would give tax cuts to the rich: one-quarter of the benefits in McCain's plan go to households making over $2.8 million annually

"Both John McCain and I favor tax cuts," Obama said. "No matter what he says, both of us favor tax cuts. The difference is that Senator McCain wants to continue the Bush tax code that rewards wealth and I want to reform our tax code so it rewards work."

Obama called McCain's plan to continue President George W. Bush's across-the-board tax cuts, and add corporate tax reductions, fiscally irresponsible.

"You know, I often say that John McCain is running to serve out George Bush's third term, but that's not fair to George Bush, because the fact is Sen. McCain is now calling for this new round of tax relief that is twice as expensive as the Bush plan and three times as regressive," Obama said.

Obama also took aim at a McCain statement on Wednesday in which he appeared to play down a timetable for withdrawing U.S. troops from Iraq. McCain said the most important factor was keeping U.S. casualties low and reiterated that U.S. troops for decades have played peace-keeping roles around the world.

The notion of leaving U.S. troops in Iraq "in perpetuity" ignored the burden placed on troops and their families from repeated tours of duty and was also costly to the U.S. economy, Obama said.

(Editing by David Wiessler)

(To read more about the U.S. political campaign, visit Reuters "Tales from the Trail: 2008" online at blogs.reuters.com/trail08/)