Obama budget plan to tax the rich

 

President Obama: "Asking a billionaire to pay at least as much tax as his secretary... that's just common sense"

US President Barack Obama has proposed to raise taxes on the wealthy in his 2013 budget, prompting an election year spending showdown with Republicans.

The proposal includes $1.5 trillion (£950bn) in new taxes, much from allowing Bush-era tax cuts to expire.

He will also call for a Buffett Plan tax hike on millionaires, as well as infrastructure projects.

Republicans said the budget, which must be agreed between the White House and Congress, would not curb the deficit.

Mr Obama unveiled details of the $3.8tn plan in an address to students at a college in Virginia on Monday morning.

Highlights of the budget include:

  • Saving $41bn over 10 years by closing tax loopholes for oil, gas and coal companies
  • Generating $61bn over 10 years through a levy on financial institutions to recover the costs of the bailout
  • Saving $25bn over 11 years in spending cuts to the US Postal Service
  • Cutting spending on healthcare by $364bn
  • Investing $476bn in infrastructure projects, with $50bn of immediate cash for transport, $30bn to upgrade schools and $30bn to hire teachers, police and firemen.
Dead on arrival?

The BBC's Steve Kingstone said the budget seeks to offer a clear contrast between Mr Obama's vision and that of Republicans.

Analysis

After years of pain and uncertainty, the American economy is showing signs of flickering into life. And President Obama is seeking to ignite passion and commitment in his supporters as his re-election effort gets under way. And that is what his budget speech was all about.

Mr Obama sought to lay down the economic vision that will define his re-election campaign. His plan does hack away at government spending. But Mr Obama's senior advisers have said bluntly that this is not an austerity budget.

Austerity, they say, will only slow down recovery. Little wonder his Republican opponents in Congress, for whom tax increases are a diabolical heresy, are raging at the plan. They are swearing to dismember it, which they can and will.

But Mr Obama's aim now is not really to persuade a furious gridlocked Congress of anything. It's to persuade frightened American voters that he can lead them back to prosperity.

At its core is the idea that the wealthiest Americans should pay more in tax and that, in the short-term, a chunk of that extra revenue should be spent on job creation, manufacturing and upgrading the nation's schools.

Republican leaders, who portray Mr Obama as a tax-and-spend liberal stoking class warfare, have pronounced the budget dead on arrival.

But in his budget message, Mr Obama said: "This is not about class warfare. This is about the nation's welfare."

"This is about making fair choices that benefit not just the people who have done fantastically well over the last few decades but that also benefit the middle class, those fighting to get into the middle class, and the economy as a whole," he added.

He also said: "In the United States of America, a teacher, a nurse, or a construction worker who earns $50,000 a year should not pay taxes at a higher rate than somebody making $50 million. That is wrong."

His plan to allow George W Bush-era tax cuts to expire would affect families making $250,000 or more per year.

The president would also put in place a rule named after billionaire Warren Buffett to tax households making more than $1m annually at a rate of at least 30%.

Payroll tax about-turn

In a populist touch, the plan would levy a new $61bn tax on financial institutions over the next decade, in an effort to recover the costs of the financial bailout.

Start Quote

He's just going to duck the responsibility to tackle this country's fiscal problems”

End Quote Paul Ryan Republican Congressman

And it would raise a further $41bn by cutting tax breaks for oil, gas and coal companies.

But Republicans are unhappy that the blueprint would entail a fourth year in a row of trillion-dollar-plus deficits.

It means the president would not fulfil his 2009 promise to half the federal deficit by the end of his first term.

The spending plan, which would take effect on 1 October, projects a deficit for this year of $1.33 trillion, with the amount falling to $901bn by 2013 and $575bn in 2018.

"He's just going to duck the responsibility to tackle this country's fiscal problems," Republican Congressman Paul Ryan, chairman of the House Budget Committee, told the Associated Press news agency.

Mr Obama has also proposed $110bn in immediate investments for transportation projects, revamps for tens of thousands of schools and for the hiring of teachers and emergency service workers.

The plan would defer major spending cuts until the economy is on a more steady footing, a priority as Mr Obama seeks re-election in November.

The budget does seek to make some savings, proposing a $364bn reduction in healthcare costs over 10 years by cutting payments to Medicaid and Medicare providers, increasing the contributions of future beneficiaries and targeting waste and fraud.

Meanwhile, Republicans in the House of Representatives are dropping a demand that any extension of a payroll tax cut for 160 million Americans be offset by spending cuts elsewhere in the budget.

Correspondents say House Republicans do not want to appear to be obstructing a tax break for ordinary taxpayers in an election year.

 

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  • rate this
    +33

    Comment number 69.

    I think it's a VERY brave move. Of all the leaders in the countries around the world in financial difficulties Obama is the only one who is attempting to raise the taxes for the super rich. All the other countries have pushed more and more budget cuts onto the working people - they all failed and took the easy option.

    Obama has my vote now.

  • rate this
    -34

    Comment number 31.

    Regardless of who we want to blame, this logic smacks of socialism we the US was not founded on. Why penalize people for being smarter, working harder, being lucky? I do agree that every one should pay their fair share. A flat tax rate for every one. No one is excluded and the US government does not spend more than it recieves.Of course reality has to set in, fat chance of that happening today.

  • rate this
    +19

    Comment number 28.

    The Nation as a whole needs to re-set the way our government does business and the private sector businesses will be better off if all parties stop the usual political twisting facts to suit party rhetoric and get on with re-building the middle class
    Without workers you have no manufacturing
    Without Education you have no workers
    The Middle class have been ignored to the detriment of the nation

  • rate this
    +29

    Comment number 7.

    This is obviously one of the right things to do economically. We need to cut expenditure as well, but the economy at large hasn't benefited from 10 years of "cut the rich more slack". It's risky politically - once the republicans have finished demonizing Mitt Romney for being rich, they'll be back to demonizing anyone who expects more from the rich.

 
 

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