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
    +4

    Comment number 79.

    American politics has suffered from the same idiotic breed we've seen here. Politicians who promise they can cut taxes whilst continuing to maintain necessary social spending.
    However if you don't raise this money through tax then there is only one way to maintain the spending, borrow it. Hence the US and UK huge deficits.
    The real problem is globalization, and the free movement of capital.

  • rate this
    -2

    Comment number 78.

    It doesn't matter what happens the US has such a pile of debt, that tax cuts alone can't even service the interest portion of it, let alone reduce the pricipal amount. The only way you can fix it is to get full employment i.e incease the tax base, have a general services tax of 15% and a flat tax of 15%. Those political games with taxes played today won't amount to a hill of beans.

  • rate this
    -4

    Comment number 77.

    He promised "Change", things changed for the worse.

    He promised "Hope", many more people now hope that they can just live an ordinary life.

  • rate this
    +8

    Comment number 76.

    71 Conix
    As the old saying goes, 'it takes money to make money'. This is very true when it comes to the US tax code. Here, someone making what you do would probably pay about the same % (taking property taxes, sales tax, etc into consideration). The wealthy pay a lower % because there are investment strategies they can use. Easy when you don't have to use the majority of your pay just to live.

  • rate this
    +3

    Comment number 75.

    67 andyparsonsga : You are toeing the party line and regurgitating GOP rhetoric when you talk about wasteful government spending and reigning in unconstitutional actions by both Congress & the Administration

    I would suggest that you begin to think for yourself

    Healthcare costs are breaking the back of our economy and they are going up so fast that we cannot borrow enough to cover the cost

  • rate this
    +6

    Comment number 74.

    #68 jobsagoodin - for sure. Ignoring the 15 trillion dollar debt, and the abject poverty endured by millions and the total lack of health care for 20%. Its not much of a reflection on the American dream is it?

    And there are plenty of the wealthiest in the UK and the rest of Europe who are avoiding their share of the tax burden who need to be coralled into payment.

  • rate this
    -4

    Comment number 73.

    The only things Obama knows are tax and spend. He knows full well that this tax and spend budget will NEVER pass in the House. This is the same nonsense that we went through over increasing the debt ceiling...and it got the country exactly nowhere. We simply cannot sustain the government's rate of spending.

  • rate this
    +11

    Comment number 72.

    Its about time.
    Its about time that the wealthy in THIS country paid more tax too, i seem to remember Thatcher saying that the wealth produced at the "top" would trickle down as Lawson slashed income tax for the rich by 20%. Well that never happoned it only ever trickled into there "offshore" bank accounts.

  • rate this
    +2

    Comment number 71.

    I am from Canada. I make about 115k a year and pay about 38% tax on my income, that does not include pension plan, E.I or sales tax, in the end i get about 48% of my income in my pocket. I fully agree that the rich should be taxed more. The problem is they will probably just figure out a way to get around it or shareholders will just cut spending to makeup for the losses....

  • rate this
    0

    Comment number 70.

    @62 Murph
    "Socialism is: government owned agriculture, government owned manufacturing, government owned enterprises, all are employed by the government. Get the picture?"

    That sounds more like Stalinism or Maoism: state capitalism, not even proper communism. Socialism is a social security net & progressive taxation. And ideally a private sector controlled by government rather than the reverse.

  • 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
    -3

    Comment number 68.

    United Dreamer 61

    'when you work that means you are being paid other people's money
    no?'

    Yes, but voluntarily, not by force. Raising taxes won't create more jobs. If it did Europe would have full employment. As it happens the US economy is faring far better than Europes right now so trying to emulate European style tax and spend seems like a pretty dumb move.

  • rate this
    -4

    Comment number 67.

    @45 As far as I can recall, the most vociferous shouts of Republicans & the TEA party have been calls to reduce wasteful government spending and to rein in unconstitutional actions by both Congress & the Administration. I believe the Republicans put forward some 29 amendments to Obamacare insisting Congress got the same program as they were inflicting on the rest of us, all voted down by the Dems

  • rate this
    0

    Comment number 66.

    oh darn!

  • rate this
    +7

    Comment number 65.

    Great news. It will cost me more in taxes but the country's future is worth it.

  • rate this
    +5

    Comment number 64.

    When was the GOP taken over by Putin?

  • rate this
    +8

    Comment number 63.

    25. Shadorne
    It is NOT double taxation. The tax is only owed on the money earned. Not the principle. It's the reason Romney only paid 13% or OS of his income. All of his income comes from investments. If you are an American,you should learn about the tax code. Especially here since many readers are not American and probably don't know the difference. So please stop spreading disinformation.

  • rate this
    +4

    Comment number 62.

    Socialism is: government owned agriculture, government owned manufacturing, government owned enterprises, all are employed by the government. Get the picture?

    Warren Buffet is a genius level businessman. They call him "the Oracle" on wall street. When Buffet chooses to speak, you should choose to listen. Ten years of Bush era tax cuts put us in a bad shape. Lets try something else

  • rate this
    +4

    Comment number 61.

    #52 Jobsagoodin - when you work that means you are being paid other people's money no? Isn't that the concept of work? I assume the tax will be taken to ensure there are more jobs and consequently more people paid other people's money, yes.

    That is the concept of tax accepted by the middle classes, seemingly not understood by the rich. Then there is the concept of humanity and unsustainability.

  • rate this
    +1

    Comment number 60.

    Is there any HOPE that this CHANGE will do any good?

    Would it not have been better to have taxed more when there was more spare cash around?

 

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