ARLINGTON, VA. — As he struggles to convince voters he is the best candidate to handle the economy, John McCain is considering whether to issue a new set of economic proposals, possibly including lower taxes on dividends and capital gains.
Sen. Lindsey Graham (R-S.C.), one of McCain's closest allies, said on CBS' "Face the Nation" that the Arizona senator was weighing a plan "along the lines that now is the time to lower tax rates for investors -- capital gains tax, dividend tax rates -- to make sure that we can get the economy jump-started."
At the Virginia Victory Headquarters, which is near his campaign headquarters, McCain declined to comment on his plans, but, in a pep talk with volunteers, he acknowledged the economic troubles have hurt his candidacy. "We're a couple points down, OK, nationally, but we're right in this game," the Republican presidential nominee said.
Economists and market watchers, while thrilled with the idea of cutting taxes on investment income, were generally in agreement Sunday that it would do nothing to help solve the current financial crisis and might actually exacerbate the problem.
Changes in tax policy typically take years to have a substantial effect on the economy. And the credit logjam would not be solved by a tax incentive, several economists said.
Still, such a move might encourage people with long-term investments that have retained gains to sell, accelerating the flight from the stock market, they said.
John Cochrane, an economist at the University of Chicago, said he liked the idea of cutting capital gains taxes over the long term, but that for now the idea is a distraction.
"I think we need a 48-hour moratorium on new plans to fix the mess we're in," he said. "I'm a little worried about this business of having a new plan every day."
McCain has said previously that he would maintain the 15% tax rates on dividends and capital gains. Aides cautioned Sunday that, while discussions were underway, McCain was weighing many options and had not settled on any specific new proposals.
Graham said the campaign would discuss a plan Sunday, and he expected McCain to offer "a very comprehensive approach to jump-start the economy by allowing capital to be formed easier in America by lowering taxes."
