Obama proposes new taxes on wealthy for half of debt plan

President Obama made a defiant call on Monday for $1.5 trillion in new taxes as part of a plan to find $3.2 trillion in budget savings over the next decade, issuing his most detailed proposal yet to tame the soaring federal debt.

Abandoning earlier compromises, Obama adopted a posture that cedes far less ground in cutting the nation’s social safety net and demands much more in terms of new levies on millionaires, other wealthy Americans and some industries.

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Speaking from the White House, President Obama calls for $1.5 trillion in new revenue as part of a plan to find more than $3 trillion in budget savings over a decade.

Speaking from the White House, President Obama calls for $1.5 trillion in new revenue as part of a plan to find more than $3 trillion in budget savings over a decade.

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Graphic breaks down President Obama’s plan to find more than $3 trillion in budget savings over a decade.
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Graphic breaks down President Obama’s plan to find more than $3 trillion in budget savings over a decade.

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Running in the red

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The proposal drew an angry response from key Republicans, underscoring the considerable opposition to his plan on Capitol Hill as a special bipartisan committee on deficit reduction ramps up its work in coming weeks.

The sharp back-and-forth between Obama and the GOP on Monday also showed how little the political climate has changed since the bitter debate this summer that consumed the capital and left many Americans deeply disenchanted with Washington.

The special committee must find $1.2 trillion to $1.5 trillion in savings by Nov. 23 or the federal budget will automatically be reduced by $1.2 trillion starting in 2013, a deep cut that would be split between defense and domestic spending.

In a Rose Garden address on Monday, the president urged lawmakers to find even greater savings. And he vowed to veto any approach that does not include new levies on the wealthy alongside any benefit cuts in Medicare, the health insurance program for the nation’s retirees. He proposed nearly $250 billion in Medicare savings, largely by reducing excessive payments.

“I will not support — I will not support — any plan that puts all the burden for closing our deficit on ordinary Americans,” Obama said. “We are not going to have a one-sided deal that hurts the folks who are most vulnerable.”

Members of the 12-member “supercommittee” have resisted staking out firm public positions to leave themselves enough flexibility to reach agreement. But Republicans warned Monday that the president’s rhetoric was putting the panel’s work at risk.

Sen. Patrick J. Toomey (R-Pa.), a member of the special committee, said Obama’s plan was “defined by political posturing.”

“We do not have time to waste on political games and pushing big tax increases that will only make our economy weaker for all Americans,” he said.

Another member, Rep. Chris Van Hollen (D-Md.), endorsed Obama’s proposal as a “common-sense approach.”

“He laid out the case for putting our fiscal house in order by making difficult cuts and also asking millionaires and billionaires to pay at least the same effective tax rate as many of those who work for them,” Van Hollen said.

The group is scheduled to hold a work session Tuesday and a public hearing Thursday on tax reform.

Some Democrats offered only modest support for Obama’s plan.

“The dialogue is always stronger when thoughtful, serious ideas are on the table,” said Sen. John F. Kerry (Mass.), a panel member. “We are all mindful of the historic responsibility of the committee and welcome input on how to create jobs and put our fiscal house in order in a balanced way.”

Sen. Jon Tester (D-Mont.) said he was undecided about Obama’s proposal.

“We’ll see when it gets here,” he said. “It’s not something I would’ve written.”

The partisan clashes began even before Obama announced his plan. Last week, House Speaker John A. Boehner (R-Ohio) insisted that the special committee not consider tax increases as part of its plan to reduce the debt.

Obama took aim at Boehner in his remarks Monday, noting that the speaker had quickly ruled out taxes despite suggesting he was open to compromise.

“The speaker says we can’t have it ‘my way or the highway,’ and then basically says, ‘My way — or the highway,’ ” Obama said. “That’s not smart. It’s not right.”

Boehner told Fox News Business on Monday: “I don’t think I would describe class warfare as leadership. The government has a spending problem and I don’t believe it makes any sense to tax the people we expect to invest in our economy.”

But in his speech, Obama said, “This is not class warfare. . . . It’s math.”

Some who have been involved in deficit-reduction efforts say the posturing on both sides isn’t good for the committee’s hopes.

“Boehner has erected a goal post and now Obama has erected a goal post. And in as much as that limits the field of play, that doesn’t help,” said a Democratic aide familiar with recent deficit-reduction talks.

Obama’s proposal includes $320 billion in combined Medicare and Medicaid savings, which mainly would come from reducing wasteful spending and overpayments. Benefits for retirees would not be affected until 2017.

And breaking with a compromise offered to Boehner during budget negotiations in the summer, Obama decided not to propose raising the eligibility age for Medicare benefits.

An additional $250 billion savings would come from other domestic programs such as farm subsidies and benefits for members of the civil service and military service.

Of the $1.5 trillion in new tax revenue Obama proposes, about half would come from allowing George W. Bush-era tax cuts for the wealthy to expire. The other half would come from limiting deductions and exclusions for those making more than $250,000 and closing loopholes for special interests such as oil companies.

“We can’t just cut our way out of this hole,” Obama said. “It’s going to take a balanced approach.”

The president also counts $1.1 trillion in savings from the drawdown of troops in Afghanistan and Iraq, and $430 billion in savings from the interest the government pays on its debt.

This summer, lawmakers agreed to about $1 trillion in domestic spending cuts as part of a deal that raised the federal debt limit. The total projected savings of more than $4 trillion, if realized, should curb the growth of the debt over time and make it more manageable for the nation’s economy.

Staff writer Felicia Sonmez contributed to this report.

 
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