President Barack Obama‘s proposal to reduce long-term deficits with $1.5 trillion in new taxes is less an opening bid in a negotiation than it is an opening salvo in a struggle to draw sharp contrasts with congressional Republicans.
Obama’s proposal is aimed predominantly at the wealthy and comes just days after House Speaker John Boehner ruled out tax increases to lower deficits. It also comes amid a clamor in his own Democratic Party for Obama to take a tougher stance against Republicans. And while the plan stands little chance of passing Congress, its populist pitch is one that the White House believes the public can support.
The core of the president’s plan totals just more than $2 trillion in deficit reduction over 10 years. It combines the new taxes with $580 billion in cuts to mandatory benefit programs, including $248 billion from Medicare.
The administration also counts savings of $1 trillion over 10 years from the withdrawal of troops from Iraq and Afghanistan.
The deficit reduction plan represents an economic bookend to the $447 billion in tax cuts and new public works spending that Obama has proposed as a short-term measure to stimulate the economy and create jobs. He’s submitting his deficit fighting plan to a special joint committee of Congress that is charged with recommending deficit reductions of up to $1.5 trillion over 10 years.
In a defiant note, administration officials made clear Sunday that Obama would veto any Medicare benefit cuts that aren’t paired with tax increases on upper-income people.
Officials cast Obama’s plan as his vision for deficit reduction, and distinguished it from the negotiations he had with Boehner in July as Obama sought to avoid a government default.
As a result, it includes no changes in Social Security and no increase in the Medicare eligibility age, which the president had been willing to accept this summer.
Moreover, the new tax revenue Obama is seeking is nearly double the $800 billion that Boehner had been willing to consider in July. Republicans were already lining up against the president’s tax proposal before they even knew the magnitude of what he intended to recommend.
“Class warfare may make for really good politics but it makes for rotten economics,” GOP Rep. Paul Ryan of Wisconsin, the House Budget Committee chairman, said Sunday in reaction to one Obama tax proposal to impose a minimum tax rate on wealthy filers.
Key features of Obama’s plan, as described by senior administration officials Sunday evening:
—$1.5 trillion in new revenue, which would include about $800 billion realized over 10 years from repealing the Bush-era tax rates for couples making more than $250,000. It also would place limits on deductions for wealthy filers and end certain corporate loopholes and subsidies for oil and gas companies.
—$580 billion in cuts in mandatory benefit programs, including $248 billion in Medicare and $72 billion in Medicaid and other health programs. Other mandatory benefit programs include farm subsidies.
—$430 billion in savings from lower interest payment on the national debt.
By adding about $1 trillion in spending cuts already enacted by Congress and counting about $1 trillion in savings from the drawdown of military forces from Iraq and Afghanistan, the combined deficit reduction would total more than $4 trillion over 10 years, senior administration officials said.
Republicans have ridiculed the war savings as gimmicky, but House Republicans included them in their budget proposal this year and Boehner had agreed to count them as savings during debt ceiling negotiations with the president this summer.
Obama backed away from proposing sweeping changes to Medicare, following the advice of fellow Democrats that it would only give political cover to a privatization plan supported by House Republicans that turned to be unpopular with older Americans.
Administration officials said 90 percent of the $248 billion in 10-year Medicare cuts would be squeezed from service providers. The plan does shift some additional costs to beneficiaries, but those changes would not start until 2017.
Illustrating Obama’s populist pitch on tax revenue, one proposal would set a minimum tax on taxpayers making $1 million or more in income. The measure — Obama is going to call it the “Buffett Rule” for billionaire investor Warren Buffett — is designed to prevent millionaires from taking advantage of lower tax rates on investment earnings than what middle-income taxpayers pay on their wages.
At issue is the difference between a taxpayer’s tax bracket and the effective tax rate that taxpayer pays. Millionaires face a 35 percent tax bracket, while middle income filers fall in the 15 or 25 percent bracket. But investment income is taxed at 15 percent and Buffett has complained that he and other wealthy people have been “coddled long enough” and shouldn’t be paying a smaller share of their income in federal taxes than middle-class taxpayers.
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Associated Press writer Ricardo Alonso-Zaldivar contributed to this report.
16 thoughts on “Obama wants $1.5 trillion in new tax revenue”
Yes….I remember that healthy tax base back then when property taxes were not confiscatory. When we had no state sales tax. When state tax rates were within reason if they even existed. When FICA was not through the roof. When fees didn’t require a loan. I could go on and on since the taxes are not just federal. I now pay more percentage wise when I retired a few years back then in 1960s. I looked it up since I keep all records.
That might have been back when the highest tax bracket was 90%. Those able to pay were paying, back then. Then along came Reagan, and yes, your percentage climbed, because those at the top stopped paying…
Like water, it rolls downhill.
J.
Wait, I missed something here.
Are you telling me you were better off under the tax structure before Reagan? And that you’d be better off if we just repealed all those cuts and went back to that structure?
If so, I could get behind that.
J.
I’m talking about a tax burden that increased on not the federal level but the state. Volpe here in Massachusetts instituted a 3% “temporary” sales tax that is now 6.25%. That’s why I buy big ticket items in NH. The state taxes have also seen a steady climb with a corresponding decrease in deductions. Then toss in the myriad of other taxes and fees and you have a steady uphill climb in what I have paid in my total tax bill. Real estate tax is another that shoots up. Prop 2 and 1/2 stopped some of it.
In fact my federal taxes have remained very steady through the LBJ…Nixon….Carter….Reagan years. Rates may decrease but deductions are altered so it turns out to be a wash. The the Gawd Awful SS con game drains some more as the years go by. That percent just goes up a shade here and there but when you comp it in ten year blocks it is an eye opener.
I pulled ten years of taxes and the fluctuation from 1964 to 2004 is just a few percent. My only real advantage in the last ten years has been the fact I get nicked less in capital gains but that gets compensated by various other changes such as in business expenses/income. Again, a wash.
There have been enough web sites to show the tax burden expanding over the years. I can’t dispute it since they put in all that crap we never think about.
When I look at tax burden I look at the entire puzzle and the Feds are just a part of it.
A healthy “tax base”; I.E., maximum employment for a nation’s citizens is what makes for adequate tax revenues, not endless over budget spending while simply raising taxes on the last man or woman standing in order to feed a deadly Congressional addiction for spending more than can be levied annually.
Obama hasn’t had an original thought in years. Any article that states some ‘plan’ as his proposal is pure b.s. He’s given his daily marching orders by faceless ‘advisers’. His next game of golf, shooting hoops or chowing down the next White House chef prepared meal and hosting gala parties on the taxpayer dime is his only concern. He’s simply the duty puppet, marking time until he can exit D.C. and make beaucoup bucks on the talking circuit in addition to selling his memoirs, aka as revisionist lies. : |
Carl Nemo **==
May I draw your attention, Mr. Nemo, to the 1950’s? I think it’s safe to say that the USA had a “healthy tax base” at that time.
Your accusations of “raising taxes” are not really raising taxes, they’re just returning to the status quo – Oh, you didn’t think 90% in the top bracket worked very well? It worked fine back then.
Funny. It worked fine back in those halcyon days. Why not now?
As an aside, the idea that ‘cutting taxes stimulates the economy’ is merely an outgrowth of the Laughter (sorry, “Laffer”) Curve, the idea that by reducing taxes there would be growth so that government revenues would actually increase.
Unfortunately, Arthur Laffer himself repudiated his curve, and even if the curve were valid (Martin Gardner totally shredded it) nobody knows where we are on it…
so no, Mr. Nemo. We’re not talking raising taxes. We’re just talking bringing them back to where they were, when all was going well, and there was a healthy tax base.
And no, raising taxes does not stall the economy, nor does it destroy jobs, nor does it give Grover Norquist a coronary, much as we might like it to.
Or are you squawking about having had them drastically cut during the Reagan years (and look how well that went) and now want that to become permanent?
The world wonders.
J.
Hi Jon,
With our manufacturing base ravaged via offshoring, an estimated 30 million domestic jobs have been lost since the Reagan era with acceleration of such post NAFTA in the mid 90’s and beyond. We now have a nation of folks that used to have blue collar jobs making products for both domestic and to some degree global consumption, that are suffering greatly due to manipulation of all aspects of that which once made this nation great. Under Reagan we went from the world’s greatest lending nation to that of its greatest debtor. That’s what trickle down;I.E, ‘voodoo economics’ hath wrought.
Starting in the early 70’s and beyond with Nixon and Kissinger opening up the vast Chinese labor market at the behest of David Rockefeller, the demise of the U.S. manufacturing base was a fait accompli. Labor arbitrage became the order of the day relative to how the ‘Captains of Industry’ perceived the U.S. vs. vastly cheaper sources of the same in the Far East. We were sold out by our compromised Congress and successive presidencies that marched lockstep to their globalist slanted jody calls.
I’m not advocating we go back to punitive 90% taxation on the rich, but they and their U.S. based corporations need to pay their fair share. Many corporations now are represented by simply a mail box on Little Cayman Island or a small house in Wyoming and elsewhere to provide a so-called corporate presence. Supposedy U.S. corporate tax rates are the second highest in the world, second only to Japan, but we hear that many major corporations such as GE manage to completely avoid paying any taxes within the letter of our tax laws. Why so? Many if not most corporations have entire departments dedicated to finessing the tax code to their benefit. It’s loopholes like this that need to be summarily cut off. If they leave the U.S. in a huff than products produced by their offshore manufacturing entities need to have a hefty tariff placed upon them. This too could possibly spark domestic entreprenuerialship for producing those goods now offshored again on our mainland; with us being able to produce them more cheaply.
Something has gone horribly wrong with America’s business and government ethic along with our system of taxation which needs a major overhaul. Why anyone would want to destroy this great nation is beyond my event horizon. We have a lot of work to do, but we can turn things about. In that sense I’m an optimist, but with our elected reps and the Chief Executive, President Obama, talking out of both sides of their collective mouths; it leaves us little hope. None of them discuss the offshoring phenomena and the destruction of our manufacturing base along with any ideas on how to turn things about. Globalism is their new religion and it’s “to hell with us”, we now simply to be their abject, unquestioning tax slaves.
I’m going to provide a link concerning questionable corporate practices. So too these type services are available on the Little Cayman Island and in Europe. It’s estimated that a half trillion dollars in taxes are both avoided or outright circumvented by these type ‘storefront’ ops. The U.S. has been turned into simply ‘doormat’ nation for corporate freebooters to exploit and to wipe their soiled corporate feet upon.
https://www.dailymail.co.uk/news/article-2009138/1700-sq-ft-house-rural-Wyoming-home-2-000-corporations.html
In summation I’m not for simply raising taxes, but achieving balance and fairness across the entire spectrum of tax revenue producing sources.
Even more importantly we must pass a balanced budget amendment and make it stick. Not one cent more to be spent than can be supported by fair taxation. Without a balanced budget this entire discussion of spending cuts and cockamamie tax schemes are an exercise in futility.
Carl Nemo **==
Yes. That’s where government gets its revenue. It’s called taxes. You are correct.
Taxes are the price one pays to live in a civilized society.
J.
Civilized? LMAO! The IRS new motto is “We got what it takes to take what you have.”
New motto? Since Ronald Reagan, taxes have been dramatically cut. Perhaps they were cut a little too far?
J.
Gov’t has enough…it is how they choose to spend it.
I do have my differences in how to spend it, but President Bush came into office running a surplus that could have actually paid down the debt, and instead instantiated a giant tax cut, started two wars, and bailed out the banks.
That was not how I’d have spent it, I concur.
J.
J.
My thoughts exactly. Then instead of addressing the problem the new guy exasperates it. When you are in a fiscal hole you don’t add debt – financial 101. And the debt they have added! Our legacy to the next generation.
Nope. You add revenue.
J.
IMHO tax increases at this juncture are counter productive with the exception of the millionaires tax. Smart move by to get off the 250K “rich” bandwagon and hit the super rich. Tax increases otherwise seem just as foolish as having tax decreases passed on via debt. Decrease spending should be a priority. Examine tax hikes with economic improvement and eroding deficit spending. Revisit it when that happens.
Revenue? Its freaking taxes! It’s called taxes! I see one of the main if not the main reason the economy is not recovering is consumer spending. We have now as a herd decided to take a more judicious approach to spending and just in my own dumb middle class world I find it hard to figure out how increasing any taxes is going to spur me into a frenzy of buying. I’ll have less cash. Duh!
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