This article on President Obama's tax proposals incorrectly said that he had promised to tax only the top 2 percent of the nation's earners. Obama pledged to raise taxes for only the top 2 percent.
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In Obama Tax Plan, A Shift of Wealth From the Top Down
"It's hard to see how this dramatic tax increase, which zeroes in on those dynamic job-creating small businesses, will grow the private sector job base," Grassley said. "In fact, private sector job loss seems a more likely outcome."
Whatever the ultimate impact of Obama's policies, his goals are clear. In his budget request, he writes that the average income of the nation's top 400 taxpayers has nearly quadrupled since 1992 while middle-class incomes have stagnated. That trend, he writes, has been exacerbated by "irresponsible policy choices in Washington" that produced "huge tax cuts for the wealthy and well-connected," a reference to the Bush tax cuts.
Of the $1.3 trillion in new taxes Obama proposes to levy over the next decade, about half would be generated by simply letting the Bush tax cuts expire for high earners.
The tax plan would strike particularly hard on the Washington region, where one in seven families earns more than $200,000 a year, according to census figures. In affluent McLean and Potomac, nearly 45 percent of families hit that mark; in the District, about 12 percent of families do.
Taxpayers would begin to feel the bite when they file their 2011 taxes. Families with taxable income of at least $234,000 would:
-- See their top rate rise to 36 percent from 33 percent, while families with at least $378,000 in taxable income would pay a top rate of 39.6 percent instead of 35 percent. Income below those thresholds would be taxed at the current, lower rates.
-- Pay 20 percent on investment income instead of the current 15 percent.
-- Be permitted to claim a diminishing percentage of their itemized deductions as their income rises.
In addition, Obama proposes to raise another $318 billion by capping the overall value of itemized deductions at 28 percent. Republicans and Democrats alike have criticized that proposal, saying it could dampen charitable contributions and further depress home sales by limiting the deductibility of mortgage interest. An analysis by the Tax Policy Center indicates that the plan would reduce annual giving to charities by 2 percent, or roughly $9 billion.
Sperling defended the idea as "smart, fiscally responsible and progressive."
"If you want to take on major national challenges, like providing more coverage in health care in a fiscally responsible way, you have to make tough choices that are not going to make everyone happy," he said. Despite the grumbling on Capitol Hill, he said, the administration is "standing by" the proposal.
Some Republicans say they're having a tough time making the case against Obama. Rep. Paul D. Ryan, the senior Republican on the House Budget Committee, said he has found Obama's tax plans to be hugely popular back home in Wisconsin, where people blame Wall Street financiers for the collapse of the economy and the loss of Wisconsin jobs.
"Class warfare makes for good politics," Ryan said. "It preys on people's emotions of fear and envy. And, right now, those emotions are running at an all-time high."