Obama proposes $1.5tn tax hike to cut deficit

US president announces a number of measures aimed at reducing deficit in next 10 years, saying rich should pay more tax.

 Obama stated the planned tax reforms are not a ‘class warfare’ but just maths[Reuters]

Barack Obama, the US president, has proposed $1.5 trillion in new tax revenue as part of his long-term deficit- reduction plan.

Speaking at the White House on Monday, Obama said the health of the economy depended on what the government did right now.

He  said he wanted to introduce cuts in spending, structural reform, and a plan where the wealthiest do not skip out on paying their fair share of taxes.

“Middle class families should not have to pay higher taxes than millionaires and billionaires,” he said.

“I reject that these proposals will create a class warfare in the US. This is not a class warfare, this is maths.”

Obama said that over the past decade, the introduction of tax cuts for multi-millionaires, the cost of two wars, and the recession, had turned an economic surplus into a deficit.

“If we don’t act, it will fall on the shoulders of our children. Washington has to live within its means. We have to cut what we can afford, to pay for what really matters,” he said.

The president announced a range of proposals aimed at cutting the deficit by $3tn in 10 years.

It includes nearly $250bn in reductions in spending on Medicare and the federal health care programme that primarily benefits the elderly.

It also includes $330bn in cuts in other mandatory benefit programmes, and savings of $1 trillion from the withdrawal of troops from Iraq and Afghanistan.

But the plan includes no changes in social security, and does not include an increase in the Medicare eligibility age, which the president had considered this summer.

‘Fair share’

The president’s speech was a mixture of economics and politics, singling out the Republican’s refusal to allow amendments to corporate tax laws, which currently allows the super-rich to sidle around tax payments.

“It is only right we ask everyone to pay their fair share,” he said, adding that it was unfair that a school teacher with a $50,000 annual salary pays proportionately more than a businessman who brings in $50m annually.

“I ask that the wealthy pay the same rate they were paying before the Bush tax cuts,” he said.

“We are not going to have a one-sided deal, which is going to hurt the folks who are the most vulnerable.”

He also said he would not “support any plan that puts the burden on the middle class.”

Rejection from Republicans

Republicans in Congress have already said they will not agree to any plans to increase taxes.

House of Representatives Speaker John Boehner rejected President Obama’s $3 trillion plan to cut the deficits, saying it would fail to tackle long-term problems and would raise taxes.

In a statement, Boehner, a top Republican in Congress, said Obama “has not made a serious contribution” to the effort by a special bipartisan congressional committee that has been asked to make recommendations to reduce the deficit by $1.2 trillion over 10 years.

Boehner said the president’s proposal fails to tackle the financial problems facing federal health and retirement programs, and insists on raising taxes.

Obama’s plan

The $1.5 trillion in tax revenue would include about $800bn realised over 10 years from repealing the Bush-era tax rates for couples making more than $250,000.

It would also place limits on deductions for wealthy earners and end certain corporate loopholes and subsidies for oil and gas companies.

The administration has also identified $430bn in savings from lower interest payment on the debt.

Obama wanted a “Buffett Rule” that would see people who earn more than $1m pay the same rate of tax as those who earn less.

The proposal refers to the billionaire investor Warren Buffett, who complained that he and his wealthy peers pay relatively less tax than the people who work for them.

Source: Al Jazeera, News Agencies