Obama backs oil profits tax, attacks McCain

RALEIGH, North Carolina (Reuters) - Democratic presidential candidate Barack Obama sought to tap into Americans' anxiety over high gasoline prices on Monday by pledging to seek a windfall profits tax on U.S. oil companies if elected.

Launching a two-week focus on the ailing U.S. economy, Obama drew a sharp contrast with Republican John McCain, his rival in the November election, accusing him of a "full-throated endorsement" of President George W. Bush's fiscal policies, including tax breaks for oil companies.

"I'll make oil companies like Exxon pay a tax on their windfall profits, and we'll use the money to help families pay for their skyrocketing energy costs and other bills," the Illinois senator said.

With Americans struggling to pay for record high $4-a-gallon gasoline, the jobless rate up and consumer confidence battered, Obama is attempting to focus the general election campaign on the U.S. economy.

A Gallup poll gave Obama a mild bump in support following rival Hillary Clinton's departure from the Democratic race. It said he leads McCain 48 percent to 42 percent among registered voters.

Obama renewed his call for a $50 billion stimulus package as a way to try to spur consumer spending and jolt new life into the economy, and a $10 billion fund for homeowners caught up in the housing crisis.

McCain, at a fundraising luncheon in Richmond, Virginia, said "Americans are hurting."

"We need lower taxes, we need to stimulate our economy, we need to keep people in their homes," he said, accusing Obama of wanting to raise the capital gains tax on stock profits.

The economy is more familiar turf for Obama. In contrast, McCain has used national security and foreign policy as the centerpiece for his campaign and has repeatedly accused Obama of being too inexperienced to lead the country.

Obama, 46, who would be America's first black president, charged that McCain's support for extending Bush's tax cuts would allow $2 trillion in corporate tax breaks, including $1.2 billion for Exxon Mobil Corp, which had earnings last year of $40.61 billion.

"If John McCain's policies were implemented, they would add $5.7 trillion to the national debt over the next decade. That isn't fiscal conservatism, that's what George Bush has done over the last eight years," Obama said.

On Obama's charge about corporate tax breaks, McCain economic adviser Doug Holtz-Eakin told reporters he assumed Obama was referring to "basic across-the-board tax cuts needed for job growth."

He disputed Obama's claim that McCain's policies would increase the national debt, saying McCain would aim to balance the budget by the end of his first term in 2013.

CRITICS SAY TAX DOES NOT WORK

Critics of the windfall profits tax say it proved to be counterproductive when it was last put in place in the United States in 1980 during the final year of President Jimmy Carter's administration.

Those critics say the measure prompted oil companies to cut back on domestic production while failing to raise as much in tax revenue as lawmakers expected. It was repealed in 1988 during the Reagan administration.

Obama said he would seek a reform of the U.S. tax code if elected in November, saying the current tax system is a "10,000-page monstrosity."

In a bid for the older voters from whom rival Clinton drew support before leaving the race for the Democratic nomination on Saturday, Obama said he would seek to eliminate income taxes for any retiree making less than $50,000 per year.

Obama opened his economic tour in North Carolina, a state that Bush won in 2004 with 56 percent of the vote. Obama won the state's Democratic contest by a wide margin over Clinton.

(Additional reporting by Caren Bohan and Jeff Mason; Writing by Steve Holland; 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/)