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
    -8

    Comment number 39.

    34.Tim0thy,

    We know full well what the word "Socialism," means, some people just think they're entitled to their own definitions and facts. Please don't be so patronizing. We Yanks aren't THAT dumb. ;)

  • rate this
    +7

    Comment number 38.

    since Reagan 3 decades of tax cuts for the rich
    result the first generation of working people to be worse of than their parents and a longer recession than the 30's
    the rich save their money and invest it on asset inflation taking money out of the economy
    inequality grew before the 30's depression too
    growing inequality reduces demand in the economy and has a major dampening effect

  • rate this
    +4

    Comment number 37.

    Systematic

    I agree with the whole of your synopsis bar one point.

    The parasites in society may call themselves 'Upper' class,however, leeches and other such creatures will take any position open to them in which to bleed us dry.

    There is nothing 'Upper' about them.

  • rate this
    +1

    Comment number 36.

    Can anyone confirm whether a cost of living factor is discussed in the BO's proposal? $250K in NYC isn't the same as in HOU.

  • rate this
    +5

    Comment number 35.

    Ah but 13, the Republicans all think that Obama is a socialist. Unfortunately they have no idea what socialism really is.They could always have Mr Brown instead and we could have Obama, then the Americans would really understand what socialism is!The Republicans have always been against tax rises and guess who pays? The middle classes because they are the bulk of the population and easiest to tax

  • rate this
    +21

    Comment number 34.

    31.dwc
    The word 'socialism should be removed forthwith from the US English dictionary. Americans just have no clue what socialism is or was. The US was a good place to live in up until the late 1970's and then the rich started getting richer and richer and the rest worked harder and harder for the same amount or less. That's fact and you should get your head round it not bleat about 'socialism.

  • rate this
    0

    Comment number 33.

    Just talk. It won't happen. Obama talks the talk but doesn't walk the walk. Just how much better off are Americ's poor since he took charge? And how much richer are the rich?

    All mouth and no trousers!

  • rate this
    -1

    Comment number 32.

    "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." With the country already over 15 trillion in debt and more will be added annually, just when do they expect a steady footing to come? If I were in debt 100 thousand should I go buy a new car to make me feel better? Why do all the insane settle in D.C.?

  • 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
    +18

    Comment number 30.

    Some soothsaying economist can correct me if my figures are way off, but Greece which has had to implement some severe austerity measures, has a budget deficit per capita of $2,200. The US weighs in at $3,200 per capita. Perhaps it is finally time to stop fudging and face reality. Obama would appear to be hitting the nail on the head.

  • rate this
    +7

    Comment number 29.

    9.BluesBerry
    I'm not sure he is scared of banks but he certainly is advised by many banksters. There are, I understand, more ex Goldman Sachs people working in the Obama administration than there ever were in the Bush one.

  • 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
    +15

    Comment number 27.

    @BlackBart41 Um, you do realize that here in America we are broke? The rich are paying the same in taxes as the middle class, so I think they can "spare" a little bit.

  • rate this
    +1

    Comment number 26.

    We are in the habit to treat the “symptoms” instead the “cause”. When we look at nature all is ordered by principles. Thus is our economic behaviour. The economy is all about our “monetary system”, “remuneration”, and “taxation”. Every other effort will only end in a “catch 22” situation. For your information Google “The World Monetary Order”.

  • rate this
    -10

    Comment number 25.

    Repeal of the Bush era tax breaks seems reasonable.

    A Warren Buffet tax would destroy US employee pension funds, which are all invested.

    The reason the rich pay low tax is that the majority of their earnings come from holding investments in businesses and these investments are ALREADY taxed BEFORE any profits are distributed.

    Obama and Warren Buffet are proposing DOUBLE TAXATION.

  • rate this
    +8

    Comment number 24.

    19.BlackBart41
    I don't know where you get your information from about Europe but I would guess it's from Faux News.

  • rate this
    +12

    Comment number 23.

    You can expect those who defend the low tax rates to use the excuse that it'll cost jobs, the problem is during the periods of lower tax rates jobs that could be shipped out were shipped out to other countries any way. The problem will be that once the party ends those rich people will be the first in lifeboat leaving everyone else to carry on picking up the bill.

  • rate this
    +13

    Comment number 22.

    Good luck Mr Obama maybe our leaders over here in Europe will take heed of what you do and do the same. In the UK one of the crazy economies has been to fire 17,000 tax collectors so soon we will be like Greece and not collect taxes due. It makes sense if you are a rich person I suppose.

  • rate this
    +2

    Comment number 21.

    Probably wishful thining but I hope this is not used as a political bandwagon to raise taxes in the UK. Context is everything and even if these new US taxes are implemented - US tax rates will still be less than / even with UK equivalents.

  • rate this
    +7

    Comment number 20.

    It is about time that the ultra-rich start getting taxed accordingly. Why should they get to own three houses, while many Americans struggle to own one? Politicians just don't like the idea because they want to keep their money and line their own pockets.

 

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