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
    -13

    Comment number 19.

    By all means, tax the rich. Then when we can't get more from them we'll tax the middle class. And pretty soon we'll be like the UK and Europe, broke and begging for more.

  • rate this
    +4

    Comment number 18.

    Tax does have to go up. That is not an option.
    But i am not sure continued spending is the best plan
    I think Services need to be cut too
    However I thought the Car Manufacturer Bailout was a bad Idea and that worked pretty good, so I guess smarter minds than mine have thought this through.
    However surely at some point the Debt (not just the Defict the actual Debt) has got to dealth with
    When ?

  • rate this
    +17

    Comment number 17.

    No matter the country, its always the same. An upper class of liars and cheats trying to fool what they believe an ignorant majority. Good luck America. Maybe somehow someone will fix something soon.

  • rate this
    +26

    Comment number 16.

    The budget will NEVER be balanced and the debt will NEVER be less until the crazy Bush tax cuts that literally bankrputed our nation expire. The clowns who pop up when we have a Democratic president and suddenly pretend to care about the budget and spending are pathetic. They didn't care when GW Bush blew up a trillion dollars in Iraq and bankrupted the nation with his tax cuts for the rich.

  • rate this
    +6

    Comment number 15.

    Good luck, Barack. I hope you succeed.

  • rate this
    -17

    Comment number 14.

    Taxing has never been a solution to the debt. When will they learn to quit making the same mistakes over and over?

    and more taxes on the 'rich' who already pay most of the the taxes!

    that will only cut back on business which is what would produce more income and that is what we need to fight the recession.

    that is the same mistake Japan made in the 90s and caused their recession.

  • rate this
    +4

    Comment number 13.

    If America doesn't want Obama, can the UK have him? Please?
    Would be nice to have someone who's got his priorities right in power for once.

  • rate this
    +2

    Comment number 12.

    Which is better? 1. Tax the 1% or 2. layoff a lot of the 99% It's a lot like trying to decide between taxes for a few or no jobs for the many.

  • rate this
    +19

    Comment number 11.

    The only thing not to like will be the reaction by gun totting, moose hunting, rich, conservative tea drinkers, when they splutter that Obama is turning the US into a communist country. They'll say money from hardworking Americans is already being doled out to the undeserving poor and that Obama should be impeached for being anti American, all the while "trousering" a cool quarter of million$.

  • rate this
    +6

    Comment number 10.

    Lots of lovely words with elections on the horizon, nothing ever changes.

    Many people are still waiting for him to earn his Nobel gong.

  • rate this
    +5

    Comment number 9.

    If Obama really wants to tax the rich & the powerful, he ought to buy into the financial transaction tax (FTT) which would hit every financial transaction conducted by the big financial investment houses, as well as provide an audit trail for their nefarious activity. Rep or Dem - won't matter; this would a tax capture at point of trade. Obama, scared of banks?

  • rate this
    +9

    Comment number 8.

    A great idea, but one that has no chance in Congress due to the 1%; the outsourcing bureaucrats who call themselves 'wealth creators' in order to preserve their, quite frankly, absurd amounts of cash.

  • 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.

  • rate this
    +6

    Comment number 6.

    Even though its the right thing to do, has Obama just blown his chances for re-election? He has my vote regardless

  • rate this
    +16

    Comment number 5.

    "Earlier, Republican presidential candidate Mitt Romney labelled the plan an 'insult to American taxpayers'." Is this the same Mitt Romney who paid a 13.9% tax rate on the $21.7 million he earned in 2010? Insult to American taxpayers indeed.

  • rate this
    +4

    Comment number 4.

    "...tax households making more than $1m annually at a rate of at least 30%."

    Those poor ba****ds - who does Obama think he is? Robin Hood?! :P

    Isn't it something like 50% here if you earn 6 figures? Those millionaire Americans, honestly, don't even know they're born!

  • rate this
    +8

    Comment number 3.

    Poor people don't matter in the USA and UK because they are too poor to matter. This is why you can tax poor people into poverty?

    Is that what the USA Republicans are saying? Is this what UK Conservatives are saying? Its not what the Germans do, I hope it does not continue in the USA and UK, and I hope the rich pay their share.

  • rate this
    +4

    Comment number 2.

    There's deficit reduction and then there's debt reduction. This budget addresses the former but not the latter. As to the details, I would have to agree that $250,000 per year is a pretty big income.

  • rate this
    +3

    Comment number 1.

    YES! No I Mean Hell YES!

 

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