Mexico dilutes fiscal reform as plan dodges sales tax

Mexico's President Enrique Pena Nieto gestures after the presentation of the fiscal reform at Los Pinos presidential residence in Mexico City, September 8, 2013. REUTERS/Edgard Garrido

MEXICO CITY (Reuters) - Mexico's government on Sunday proposed raising taxes for higher earners, putting a levy on stock market gains and boosting social programs to help the poor, but it shied away from widening a controversial sales tax amid an economic slowdown.

The planned fiscal reform includes a universal pension and unemployment insurance in a country where half the population lives in poverty, as well as emergency spending that will bring on a budget deficit this year and next.