EW YORK - Fighting to build on his popularity among New Hampshire's Republican voters, Senator John McCain will unveil an expanded tax plan tomorrow that would increase the number of taxpayers in the lowest, or 15 percent, tax bracket if there is additional economic growth and a larger-than-projected budget surplus.
McCain's tax policy address at the Concord Chamber of Commerce comes as he and Texas Governor George W. Bush have clashed repeatedly in recent days over who has the better economic prescription for the nation. While Bush has proposed the larger tax cut - $473 billion compared to McCain's $250 billion over five years - McCain would put more of the nation's budget surplus toward shoring up Social Security.
In New Hampshire, the subject of taxes has long been a touchstone for many voters. The state has no income tax, and even the governor, a Democrat, has spent the last few years staving off some members of her own party who would like to institute one.
''In the New Hampshire Republican Party, I think there's a pretty strong sentiment that the government that governs least, governs best,'' said Will Abbott of Holderness, N.H., who served as political director to Bush's father in 1988. ''And that means that the lower the taxes, the better.''
Besides arguing over the amount of money that should be set aside for Social Security, McCain and Bush have also taken opposite approaches toward flattening the current tax structure. McCain focuses on vastly increasing the number of people paying the lowest tax rate by reducing the numbers now in the 28 percent bracket; Bush, on the other hand, would eliminate the top tax bracket of 39.6 percent for the wealthiest earners, and he would cut the 15 percent bracket to 10 percent.
''Voters like tax cuts and they always will and they always should,'' said Dan Schnur, a spokesman for McCain. ''But long-term economic security is just as important. We're providing both.''
The Bush campaign, however, views the Arizona senator's tax proposal as inadequate.
''No matter how you cut it, people will pay more in taxes under Senator McCain's plan than they will under Governor Bush's plan,'' said Ari Fleischer, a Bush spokesman. ''Like Al Gore, Senator McCain has said Governor Bush's tax plan is too big, which means people will pay more in taxes under Senator McCain than Governor Bush.''
McCain's latest tax proposal would increase the tax deduction for children from $500 to $1,000, the same as Bush's plan; create a new tax deduction for the cost of long-term health care insurance; and provide a package of new savings incentives and plans similar to the existing 401k plan.
But most important, McCain would expand his tax cut beyond $250 billion, assuming the Congressional Budget Office produces a more favorable economic forecast. Bush has already used rosier economic assumptions in his plan.
Last June, McCain first proposed allowing 25 million more people to qualify for the lowest tax bracket. Couples earning $70,000 a year would qualify, compared to the current $43,000 a year.
McCain also said he would eliminate the tax penalty for married couples; eliminate the inheritance tax on estates valued under $5 million; and eliminate the earnings test for senior citizens who lose some Social Security payments when they begin to earn more than $20,000 annually. All of these positions are similar to Bush's.
The subject of taxes will probably define the continued debate between Bush and McCain during the last three weeks before the primary. Bush is already broadcasting television commercials about his plan, and McCain is set to begin doing so shortly. He is running ads about protecting Social Security for seniors in the coming years as the number of people drawing on the trust fund exceeds the number paying into it.
''Taxes are the eternal issue in Republican primaries,'' said Darryl West, a political science professor at Brown University. ''There's hardly been an election over the last 20 years where taxes have not figured prominently.''
But West said there is no survey evidence from the last year to show that voters care about the size of a tax cut. Instead, he said, national polling data show voters care more about Social Security, health care and education than a massive tax cut.
On the subject of Social Security, it is McCain who would devote 62 percent of the non-Social Security surplus to shoring up the program. That comes to about $700 billion over 10 years, according to his aides. Bush, on the other hand, would set aside the existing payroll taxes already tagged for Social Security, but not any of the non-Social Security surplus.
Indeed, Bush uses most of the non-Social Security surplus for his tax cut. McCain, on the other hand, would use just 23 percent for reducing taxes. He would also take 10 percent of the surplus for reinforcing the Medicare program, and 5 percent for lowering the national debt, which now totals more than $5 trillion.
McCain's campaign officials insisted yesterday that the senator's expanded tax proposal is not a reaction to Bush's focus on tax cuts.
''We laid out a schedule for a series of policy speeches early this fall,'' said Schnur. ''Our original intention from the beginning was to schedule those speeches for December and January when the largest possible number of voters would be paying attention.''
Beginning Dec. 1, McCain has delivered policy addresses on foreign policy, defense, health care and the environment. His education address will be given Jan. 17 in New Hampshire.
