Bush-McCain Tax Battle Takes To Airwaves.

By Jerry Miller | July 7, 2008 | 8:25 PM EDT

MANCHESTER, NH (CNSNews.com) - The tax battle between Texas Governor George W Bush and Arizona Senator John McCain has taken to the airwaves, with McCain running an ad accusing his opponent of conducting a dirty campaign and breaking his promise not to do so.

In a 30 second spot, now airing on New Hampshire television, McCain, speaking to the camera, says, "I guess it was bound to happen. Now my opponent has started the political attacks, after promising he wouldn't. Mr. Bush's attacks are wrong."

McCain then details his intention to use the anticipated budget surplus to cut taxes, shore up Social Security and reduce the national debt. "When I began this campaign, I promised you something better, that I wouldn't engage in attack politics. I'm keeping my pledge."

The ads, which began running Friday, accuse Bush of knowingly speaking falsehoods about the McCain tax plan. "What he is saying is not true and I had to say it's not true. I said it as politely as I can...I have learned over the years that you have to respond if a claim is not true. You can't just allow it to sit out there."

McCain has also used staff and supporters to respond. Peter Spaulding, his New Hampshire chairman and Mike Dennehy, the campaign's northeast political director, also contend Bush is not being truthful about the McCain tax plan.

The two said the campaign responded after seeing the damage Vice President Al Gore inflicted on challenger Bill Bradley, over health care, when Bradley failed to fight back.

Campaigning in Iowa, Bush attacked back, insisting it was McCain who was setting the negative tone. "That's one of the oldest tricks in the book, We've got a policy disagreement. He laid out a tax plan that doesn't ad up. An honest debate about how to cut taxes is important to the Republican Party."

The ad comes some two weeks after the two men shook hands during a Michigan debate, promising each would air only positive spots.

The air war broke out after a Bush ad accused McCain of wanting to tax employer benefits, costing workers some $40 billion in additional taxes, as part of a $237 billion tax cut plan.

"I darn sure don't agree with saying you're going to take $40 billion of employer related benefits and have people pay taxes on them," Bush said in his ad, which is now airing.

In response, McCain insists, "There is no tax increase," and adds, "My plan cuts taxes, secures Social Security and pays down the national debt. There is no tax increase."

While that's the senator's position, some key McCain staffers acknowledge the tax plan will cost some workers slightly less than $4 billion in additional taxes, since they would now pay taxes on certain fringe benefits, including their employers donations to health club and spa dues, tickets to sporting events, employee parking, as well as employee discounts.

In fact, the campaign has released information, in the form of documents, which show that a loophole would actually cost workers some $3.9 million, by ending exemptions on those fringe benefits.

Despite the admission, Bush staffers, including Ari Fleischer, a frequent campaign spokesman, insist McCain release more details. "If they were able to release their estimates, it would be much easier to resolve the issue."

Meanwhile Bush plans to continue hammering McCain in televised spots, which, according to the campaign, the average Granite State voter will see as many as a half a dozen times before the February 1 primary.

Bush is also faulting the McCain tax plan for costing charities, universities, museums and other non-profit groups as much as $ 9 billion.

According to the McCain plan, people whose contributions to charity include stocks and bonds, real estate or art work, would no longer be able to take a tax deduction based on the current appreciated value of the item. Rather, the donor's deduction will be limited to the original cost of the gift.

Campaign officials contend this amounts to little more than removing a loophole in the current tax code, while the Bush campaign insists the move would help kill incentives to give to charities.

According to a 1999 study, done by the Congressional Budget Office, in '96, 32 million taxpayers claimed more than $86 billion in charitable deductions, costing the government an estimated $22 billion. By limiting the deduction, the government would realize an estimated $9.1 billion over a five year period and nearly $18 billion over 10 years.