* McCain would keep Bush’s tax cuts
* Obama sees tax relief for middle class
* McCain asks, “What kind of change?”
* Obama doubts McCain can pay for tax cuts
By Jeff Mason
WASHINGTON, June 10 (Reuters) - Republican John McCain and Democrat Barack Obama staked out starkly opposing stances on taxes on Tuesday, with McCain promising corporate tax breaks and Obama pledging tax increases for many.
McCain in a speech in Washington accused Obama of seeking the single largest tax increase since World War Two while Obama, in a television interview, said he would increase taxes on the wealthy and on stock profits to pay for a middle-class tax cut of $1,000 a year.
“No matter which of us wins in November, there will be change in Washington. The question is what kind of change?” McCain told a conference for small businesses.
Obama told CNBC that 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 said the U.S. economy has been “out of balance for too long.”
“The general principle of raising taxes on higher income Americans, like myself, and providing relief to those who haven’t benefited as much from this new global economy, I think, is a sound one,” Obama said.
But Obama, 46, said he would consider deferring some of the tax increases, depending on the economic situation he inherits from President George W. Bush should he win the November election.
The differences on how to spur new growth in the sluggish U.S. economy, at a time of rising unemployment, record-high gasoline prices and a persistent housing crisis, represented a key point of argument for the two candidates in their battle to determine who wins the presidency.
Obama and other Democrats believe economic conditions, including $4-a-gallon gasoline, will persuade many Americans to vote for them in November. McCain wants to fight the election on national security, which he considers his strength.
McCain, 71, vowed to maintain Bush’s tax cuts, lower corporate tax rates from 35 percent to 25 percent and allow companies to expense new equipment and technology in their first year.
He supported keeping capital gains taxes as they are now, doubling a tax exemption for children, and phasing out the Alternative Minimum Tax, which he said would save some 25 million middle-class families up to $2,000 in a year.
He said he could pay for the plan by cutting what he called wasteful government spending, including ethanol and sugar subsidies and weapons systems.
“We’re going to scrub every agency of government and we’re going to make them justify their existence. And if they can’t, they’re going to go out of existence,” he said on CNBC.
Democrats argue not enough cuts could be made in the federal budget to pay for McCain’s tax cuts, which Obama said would total $300 billion.
“I’ve said that John McCain is running to serve out a third Bush term, but the truth is when it comes to taxes, that’s not being fair to George Bush,” Obama told reporters in St. Louis, where he traveled to talk up his proposals on revamping the U.S. health care system.
McCain was equally dismissive of Obama’s economic plan, which he said would hurt the 100 million Americans who own stock.
“Under Senator Obama’s tax plan, Americans of every background would see their taxes rise — seniors, parents, small business owners and just about everyone who has even a modest investment in the market,” McCain said.
Anti-Iraq war protesters interrupted McCain’s speech a handful of times, standing up and saying war was bad for small business before they were escorted out of the room.
(Additional reporting by John Whitesides; writing by Steve Holland and Andy Sullivan; editing by David Alexander and David Wiessler)
To read more about the U.S. political campaign, visit Reuters "Tales from the Trail: 2008" online at blogs.reuters.com/trail08/