McCain proposes consumer tax cuts to boost economy

PITTSBURGH (Reuters) - Republican presidential hopeful John McCain proposed a summer gas tax reduction and other tax cuts on Tuesday in a bid to reassure voters he would help them navigate an ailing economy.

McCain, the expected Republican nominee for the November election, proposed the steps to boost the struggling U.S. economy, which has surpassed the Iraq war as voters' top concern.

The Democratic candidates quickly denounced the Arizona senator's ideas as a continuation of the economic policies of unpopular Republican President George W. Bush.

"I don't think America can afford four more years of the failed Bush policies, and that's what he's offering," Illinois Sen. Barack Obama told a gathering of construction labor unions in Washington.

Obama and his rival for the Democratic nomination, New York Sen. Hillary Clinton, have accused McCain of being economically illiterate and out of touch with ordinary Americans' pocketbook concerns.

While the Democrats presented plans to boost the economy and help stave off home foreclosures early this year, McCain had not outlined specific ideas until recent weeks.

On the day when U.S. income taxes are due, McCain proposed a simpler tax code and a phase-out of the alternative minimum tax, which has increasingly snared middle-class taxpayers along with the wealthy.

With gasoline prices expected to climb beyond a new high of $3.39 per gallon, he asked Congress to suspend the 18.4 cent federal gas tax and 24.4 cent diesel tax from the Memorial Day holiday at the end of May to Labor Day in early September.

"The effect will be an immediate economic stimulus -- taking a few dollars off the price of a tank of gas every time a family, a farmer or trucker stops to fill up," McCain said.

McCain also said he would suspend U.S. purchases of oil for the emergency stockpile known as the Strategic Petroleum Reserve because he believes the purchases are contributing to higher gas prices.

STUDENT LOAN, TAX RELIEF

He also proposed relief for student loans and would double the personal tax exemption for dependents from $3,500 to $7,000.

McCain used his speech not only to put some distance between him and the Bush administration but also to say both Democrats and fellow Republicans are guilty of spending excesses.

He said his Democratic rivals would causes taxes to rise for "Americans of every background," totaling $1 trillion over a decade.

He poked fun at Obama's book title, "The Audacity of Hope," by saying: "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 he would trim wasteful spending by $100 billion and use the savings to pay for a tax cut for corporations. He also proposed increased funding for the federal government's Medicare prescription drug program by requiring higher payments for couples who earn more than $160,000.

Clinton's campaign denounced McCain's plan.

"It is a George Bush redux of corporate windfalls and tax cuts for the wealthy," Clinton policy director Neera Tanden told reporters.

Obama, who is battling Clinton for the right to represent the Democratic party in the November election, said McCain's new plans represented a shift from his earlier resistance to tax cuts.

"Somewhere along the way to the Republican nomination I guess he figured he had to stop speaking his mind and start toeing the line," he said.

(Additional reporting by Ellen Wulfhorst, writing by Andy Sullivan, editing by David Wiessler)

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