Then, Obama suggested that policymakers adopt a “framework” to achieve additional savings next year by overhauling tax laws and restructuring federal health programs. Obama pronounced himself “eager” to simplify the tax code and to work with Republicans on a far-reaching plan to restrain the government borrowing that has become a stain on his presidency. “I want a big deal,” he said. “I want a comprehensive deal.”
Obama’s most recent budget request sought to raise taxes on the wealthy and corporations by a similar $1.5 trillion. The administration estimates that returning to Clinton-era rates for top earners would generate about $850 billion over the next decade. Tack on an increase in the estate tax and the figure rises to about $1 trillion.
Some Republicans have suggested replacing that tax revenue by capping deductions, an idea promoted by GOP presidential candidate Mitt Romney. The non-partisan Tax Policy Center estimates that setting the cap at $17,000 — for all taxpayers — would do the job. And Obama’s budget proposes raising nearly $600 billion by limiting the value of deductions for top earners.
Democrats are reluctant, however, to swap higher tax rates for deduction caps, noting that the move could have a painful effect on charities and other parts of the economy. “It’s very difficult to see how you make up that trillion dollars — if we’re serious about deficit reduction — just by closing loopholes and deductions,” Obama said. “You know, the math tends not to work.”
Moreover, eliminating tax breaks for the wealthy now would make it harder to raise revenue later through tax reform without hitting the middle class, Democrats say.
“The president has been absolutely clear that a balanced approach to reducing the deficit requires high-income individuals to provide the revenue necessary for an agreement,” said Rep. Chris Van Hollen (Md.), the ranking Democrat on the House Budget Committee. “You can’t get the necessary revenue without the top rates going to Clinton-era levels.”
Obama has pressed that goal in meetings this week, first with liberal groups and then Wednesday with the chief executives
of some of the nation’s largest corporations. Many attendees represented companies that are big players in Republican politics. Chevron, for example, made the largest known corporate contribution to a political entity this year: $2.5 million to the Congressional Leadership Fund, a super PAC established by Boehner allies. And Aetna’s 2010 contributions to the U.S. Chamber of Commerce and the American Action Network, two GOP-oriented nonprofit groups, totaled more than $7 million.
Administration officials hope the executives will give Republicans political cover to accept higher taxes as part of broader debt-reduction deal. After the meeting, Honeywell chief executive David Cote, who served on Obama’s fiscal commission, predicted on Bloomberg television that the fiscal cliff would at last force action.
“I have always felt confident,” he said, “that . . . the president understood the issue overall and that it had to be both tax and entitlement reform if you truly wanted something that protected the country.”
Tom Hamburger contributed to this report.