White House seeks Aug. 1 deadline for tax reform

President Obama is seeking an Aug. 1 deadline for overhauling the tax code and making changes to expensive federal health programs, the final pieces of what the administration conceives as a far-reaching plan to rein in the national debt, senior administration officials said Friday.

The proposed deadline was included in a plan Treasury Secretary Timothy F. Geithner delivered to Capitol Hill on Thursday as Obama's opening bid in talks with congressional Republicans to avert the year-end fiscal cliff.

That plan generally mirrors previous deficit-reduction plans Obama has submitted to Congress. In all, it would reduce borrowing over the next decade by $4.5 trillion, officials said. However, Obama is proposing to dedicate about $200 billion of those savings to new measures to boost the sluggish economy, including additional unemployment benefits and extension of a temporary payroll tax cut for most workers.

The overall figure includes about $1.2 trillion in savings already in force as part of previous spending agreements with the Republican House. The White House proposes to raise $1.6 trillion in fresh revenue, with about $1 trillion coming in January, with the expiration of the George W. Bush tax cuts for high earners.

An additional $600 billion in revenue would be generated next year through a rewrite of the tax code. And $600 billion in fresh savings would come next year, with a little more than half coming from Medicare and Medicaid changes, such as higher premiums for high-income beneficiaries.

To ensure that Congress acts by Aug. 1, Obama is proposing to delay automatic spending cuts only through that date. The so-called sequester would then act as a new trigger to force congressional action. Delaying the sequester for eight months would cost about $80 billion, officials said. They recommended covering that cost with new spending cuts and tax hikes, but did not specify which ones.

Lori Montgomery covers U.S. economic policy and the federal budget, focusing on efforts to tame the national debt.
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