NEW YORK  - As presidential contenders John McCain and Barack Obama sparred over competing tax proposals on Tuesday, their top economic advisers debated similar issues of  what changes in fiscal policy will help boost the U. S. economy.

Taxes took center stage as Doug Holtz-Eakin, senior policy adviser to McCain, and Dan Tarullo, economic adviser to Obama, compared their candidates’ platforms at a Deals & DealMakers executive conference sponsored by The Wall Street Journal.

Their remarks came as their respective Republican and Democrat presidential candidates staked out starkly opposing stances on taxes, with McCain promising corporate tax breaks and Obama pledging tax increases for many.

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.  He said 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.

McCain vowed to maintain President George W. Bush’s tax cuts, lower corporate tax rates from 35 percent to 25 percent, allow companies to expense new equipment and technology in their first year and keep capital gains taxes as they are now.

While McCain said he would cut government spending, Democrats argue not enough cuts could be made to pay for his plans, which Obama said would total $300 billion.

Obama thinks it is important “to explain where he would get the revenues to do the things that he thinks need to be done in this country,” Tarullo told the conference.

“Whether you are a person in the middle class or a bond trader, you don’t want to be contemplating a very big corporate tax cut and a very big personal tax cut for upper income people and hoping against past experience that this produces the kind of growth that’s going to more than compensate for a massive federal deficit,” he said.

McCain sees easing tax pressure as a means to promote jobs creation among small businesses, in research and development and on the corporate level, Holtz-Eakin responded.

Hand-in-hand with lower taxes is reining in federal spending, the McCain adviser said.

“He’s committed to changing the culture in Washington so we don’t spend a lot more,” he said. “We actually review programs say no to things that don’t make sense and address the real issues on the spending side, which is where our problems lie.”

“No one has paid attention to what we spend on, and that’s going to change,” he said.

Click here for more Reuters 2008 campaign coverage.

Photo credit: Reuters/ Lee Celano (McCain); Jason Reed (Obama)

CHICAGO - Comedian, author and former radio talk show host Al Franken, the likely Democratic Senate candidate for Minnesota, is paying $70,000 in back taxes and penalties to 17 states to make up for what he says were mistakes by his accountant.

State Republicans say Franken, who was expected to pose a strong challenge to incumbent Republican Sen. Norm Coleman in the November election, is at fault. 

“Al Franken’s business activities must have a full, and complete public airing if he is to retain any credibility as a candidate for public office,” Ron Carey, chairman of the Republican Party of Minnesota, said in a statement.

Franken told the Minneapolis Star Tribune that errors by his New York accountant led him to overpay $49,253 taxes to New York state and Minnesota where he lived between 2003 and 2006, while not paying $53,404 in taxes to 17 states where he earned money for appearances and speeches.

The $70,000 is an estimation of what he owes, Franken said.

He and his wife, Franni, “believe in paying state and federal taxes on all our income,” Franken told the newspaper.

Carey said in a statement that Franken signed a disclosure statement showing he was aware of earning money in California and elsewhere.

Click here for more Reuters 2008 campaign coverage.

Photo credit: Reuters/Eric Miller (Al Franken speaks at rally in March)

GRAHAM, N.C. - Offering Americans a summer tax holiday from soaring gasoline prices as another example of why she is the best candidate for president, Sen. Hillary Clinton took aim on Monday at her Democratic Party rival Sen. Barack Obama.

“This is one of the big differences in this race. My opponent Senator Obama opposes giving consumers a break on the gas tax at the federal level. I support it. I understand the American people need some relief,” she told supporters gathered in a fire station here.

“Meanwhile Sen. (John) McCain says he’s all for a gas tax holiday, but he won’t pay for it. Well, that is a mistake because we can’t give up on building and repairing our roads. My plan is 100 percent paid for with the windfall profits tax on Big Oil,” she said.

U.S. drivers are reeling from soaring costs at the pump that have seen gasoline reach $4 a gallon in some parts of the country, with an average price around the country of $3.60, after oil scaled a record near $120 a barrel.

Clinton’s plan would use the windfall profits on oil to subsidize the federal gas tax holiday over the summer to make sure the country’s Highway Trust Fund — used to build and repair roads and bridges — doesn’t suffer.

Major oil companies report first quarter earnings this week and are expected to chalk up bumper profits thanks to record crude prices, with Exxon Mobil forecast to see net income rise around 22 percent to over $11 billion.

“Last year, Exxon Mobile made $40 billion in profits. So you paid through the roof and they made out like bandits. I don’t think those profits were the result of a free and fair market,” she said, blaming energy market manipulation.

Click here for more Reuters 2008 campaign coverage.

Photo credit: Reuters/Frank Polich (Clinton campaigns in Indiana).