McCain, Obama spar over economy

WASHINGTON -- Republican Sen. John McCain accused Democratic Sen. Barack Obama on Tuesday of backing measures that would increase both the costs and the taxes paid by small business, saying, "The federal government shouldn't make your work any harder."

McCain told small-business owners the presumed Democratic nominee's economic proposals would hand them higher taxes and steeper overhead costs. He also criticized Obama for pledging to renegotiate the 1994 North American Free Trade Agreement, which Republicans credit for record exports by many Democrats blame for job losses.

McCain was speaking to a gathering of the National Federation of Independent Business.

Obama, speaking later to reporters in St. Louis, defended his proposals and called McCain's remarks misleading. He said he would eliminate the capital gains tax "for the small businesses and startups that are the backbone of our economy." His income tax plans, Obama said, would cut taxes for 95 percent of U.S. workers, while rolling back the Bush administration's tax reductions for the ­highest-earning 5 percent.

McCain "wants to add $300 billion more in tax breaks and loopholes for big corporations and for the wealthiest Americans, and he hasn't even explained how he'd pay for it," Obama said.

McCain said small businesses would bear the brunt of Obama's proposed tax increases. He called for phasing out the alternative minimum tax and allowing businesses to write off some new investments.

"I don't want to send any more of your earnings to the government," the Arizona senator said.

McCain has been shoring up his anti-tax credentials, pushing to extend President Bush's tax cuts, which are set to expire beginning in 2010. Some party conservatives remain suspicious of McCain because he originally opposed the Bush tax cuts, arguing the cuts favored the wealthy and that there should be no tax cuts until the Iraq war costs were known. Now he argues that allowing the tax cuts to expire would amount to raising taxes, which he opposes.

McCain, who has admitted the economy is not his strong point, joked to the small business group: "I have never run a small, struggling enterprise -- unless you count my presidential campaign last year."

McCain would eliminate the tax subsidy for employer-based insurance and give individuals a tax break to offset the cost of buying their own insurance.

"I believe that the best way to help small businesses and employers afford health care is not to increase government control of health care but to bring the rising cost of care under control and give people the option of having personal, portable health insurance," McCain said. Workers would be able to keep their insurance "even when they move or change jobs," he said.

Obama said the McCain plan would help only the wealthy.

"He's offering a tax cut that won't ensure that health care is affordable for hardworking families who need help most," Obama said. "And his plan could actually put your coverage at risk by undermining the employer-based system that most Americans depend on."