Obama Aides Say He Would Lower Taxes

WASHINGTON — Senator Obama, with his lead against Senator McCain narrowing in some polls, is trying to portray himself as the real tax-cutter in the presidential race.

And even some conservatives are praising him for it.

A senior policy analyst at the conservative Heritage Foundation, Rea Hederman Jr., praised Mr. Obama for proposing a 20% tax rate on dividends and capital gains, lower than a 28% rate he had initially floated, though still more than the current 15% rate. "That's a great step in the right direction," Mr. Hederman said. "It's a big change from what we thought the Obama tax plan would be at the beginning of the summer."

Mr. Hederman said the middle class would likely pay less under Mr. Obama's plan than Mr. McCain's but that the Democrat was excessively reliant on complicated tax breaks that would make the tax code more confusing. "Instead of a grab bag of tax credits, lower the marginal rates," Mr. Hederman said.

The details announced yesterday, in an opinion column in the Wall Street Journal and on a conference call with reporters, marked an effort by the Obama campaign to fend off intensifying attacks from the McCain campaign that his planned tax increases would hit millions more Americans than he had been claiming.

The Obama advisers said his plan would not raise any taxes for couples making less than $250,000 annually or singles earning less than $200,000. They cited a series of proposals for tax credits and rate cuts aimed at low- and middle-income earners.

"Barack Obama is offering significantly more tax relief to middle-class families than John McCain," Mr. Obama's director of economic policy, Jason Furman, told reporters.

The McCain campaign rejected that claim. One McCain adviser, Carleton Fiorina, said she was "mystified" by the Obama campaign's assertion that its plan offered a larger tax cut for middle-class families. "Barack Obama can say it, but it doesn't make its true," she said.

Advisers to the Arizona senator said yesterday that Mr. Obama's shift to more limited tax hikes followed a pattern of changing his position for political expediency. They said his proposed increases, combined with a bevy of new spending programs, would slow the economy and hurt small businesses.

"The reality of Barack Obama's record is that he is for both higher taxes and much higher spending," Mr. McCain's senior economic policy adviser, Douglas Holtz-Eakin, said on a conference call.

A professor of economics at Stanford University who is advising the McCain campaign, John Taylor, said even the narrower tax increases would be detrimental in a sputtering economy. "This is not the time to raise anybody's taxes," he said.

Anticipating the attack from Mr. McCain, the Obama campaign dismissed the notion that tax increases on top earners would weaken the economy. "The idea that a return to the tax policies of the 1990s would harm the economy is supported by neither theory nor evidence nor the longer-term history," a treasury secretary under President Clinton, Lawrence Summers, said on the Obama conference call.

Mr. Obama's advisers said that Mr. Obama would return the top two federal income tax rates to their 1990s level of 36% and 39.6%, respectively. The Illinois senator would also support imposing an additional Social Security payroll tax of between 2% and 4% on top earners, the advisers said.

The advisers said Mr. Obama's plan represented a net tax cut overall and that it would leave most rates at the same levels or lower than during the 1990s. The federal government's take of the overall economy would be the same as it was under President Reagan, they said.

The McCain campaign has hammered Mr. Obama on his economic record of late, running ads that highlight his vote for a budget resolution that would have raised taxes on Americans making as little as $42,000 a year.

The Obama campaign also came out more aggressively yesterday on Mr. McCain's proposals, criticizing the Republican's health care plan for containing a potential hidden tax increase. The plan would eliminate the income tax exclusion for employer-provided health insurance and replace it with a tax credit of up to $5,000. Obama advisers noted that some families in high-cost states or with expensive insurance packages could end up paying more in taxes, especially in later years as health costs rise.

Mr. Holtz-Eakin responded that most Americans would see their costs decrease under the plan.