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McCain plan to target tax code, gas prices

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  • NEW: Two Democratic camps say economic plan would continue Bush years
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PITTSBURGH, Pennsylvania (CNN) -- An end to earmarks, a gas-tax holiday, government-backed mortgages -- they're all part of an economic-revival plan that a top aide to GOP Sen. John McCain described Tuesday as "big and ambitious."

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Sen. John McCain says Tuesday he wants to let Americans choose between two income tax systems.

The presumed Republican nominee also wants to create an alternative system for paying income taxes and double the income tax exemption for dependents, McCain said during a Tuesday speech at Carnegie Mellon University in Pittsburgh.

The senator from Arizona is proposing an income tax system that offers two basic rates and a "generous standard deduction," he said. McCain would let Americans choose between the new system and the present one.

"Americans do not resent paying their rightful share of taxes -- what they do resent is being subjected to thousands of pages of needless and often irrational rules and demands" from the Internal Revenue Service, he said. "We are going to create a new and simpler tax system -- and give the American people a choice."

The presidential candidate also called for doubling the federal income tax exemptions for dependents, from $3,500 to $7,000. Video Watch as McCain unveils his alternative tax system »

McCain said he wants Congress to declare a summer gas-tax holiday, suspending the 18.4-cent gas tax and 24.4-cent diesel tax from Memorial Day to Labor Day this year. Because so many industries rely on gas for production, "these immediate steps will help to spread relief across the American economy," he said.

Oil analyst Tom Kloza on Tuesday called McCain's proposal "a quick fix for people who believe cheap gas is their birthright. It's not a prudent thing to do."

The amount of money motorists would save would do little to stimulate economic growth, and revenue from the gas tax is much needed for road repairs, said Kloza, chief oil analyst at research firm Oil Price Information Service.

Kloza also said reducing demand is one of the best ways of lowering gas prices.

Meanwhile, McCain said he plans to address the subprime mortgage crisis by offering people at risk of foreclosure a 30-year, fixed-rate mortgage loan backed by the federal government. People will be able to pick up applications at any post office, he said.

"Citizens will keep their homes, lenders will cut their losses, and everyone will move on -- following the sounder practices that should have been observed in the first place," he said.

McCain said he also would like eventually to phase out the alternative minimum tax, a move he claims will "save more than 25 million middle-class families more than 2,000 dollars every year." Gallery: See McCain's chief proposals »

According to the IRS Web site, the tax was intended "to target a small number of high-income taxpayers who could claim so many deductions they owed little or no income tax. A growing number of middle-income taxpayers are discovering they are subject to the AMT."

And on Medicare, McCain plans to tweak the prescription drug benefit to exclude taxpayers who can afford medicine without government assistance.

The campaigns of Sens. Barack Obama and Hillary Clinton were quick to respond to McCain's proposals.

"Sen. McCain's economic plan offers no change from George Bush's failed policies by going full speed ahead with fiscally irresponsible tax cuts for the wealthiest Americans that John McCain himself once said 'offended his conscience,' " said Obama campaign spokesman Bill Burton.

"John McCain's plan is one that could have been written by the corporate lobbyists who run his campaign, and probably was," he added. Video Watch as Obama says McCain is now "toeing the line »"

Clinton policy adviser Neera Tandon said McCain is offering an economic strategy that "Americans simply cannot afford: a George Bush-redux of corporate windfalls and tax cuts for the wealthy that will bankrupt our government and leave working families with the bill."

If elected president, McCain said he plans to overhaul the tax code, close "costly, unfair" corporate loopholes and veto every bill containing earmarks "until the Congress stops sending bills with earmarks." Lawmakers have been criticized for using earmarks -- spending initiatives attached to unrelated bills -- to fund pet projects and curry favor with constituents and donors.

Despite the promised assault on corporate loopholes, McCain said he would use the money saved via his proposals to ease the burden on employers by lowering the business income tax from 35 percent to 25 percent.

"As it is, we have the second-highest tax on business in the industrialized world. High tax rates are driving many businesses and jobs overseas -- and, of course, our foreign competitors wouldn't mind if we kept it that way," he said.

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The senator also hopes to enact a one-year pause in discretionary spending while the government conducts a "prompt and thorough" review of each department's and agency's budget. Military spending and veterans benefits would be exempt, he said.

McCain attended a $1,000-a-head finance luncheon at a downtown Pittsburgh hotel following his speech at Carnegie Mellon. E-mail to a friend E-mail to a friend

CNN's Ed Hornick and CNNMoney.com's Steve Hargreaves contributed to this report.

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