- Days left

Obama Proposes Debt Plan Built on Taxes on Rich

×
In a blunt rejoinder to congressional Republicans, President Barack Obama called for $1.5 trillion in new taxes Monday, part of a total 10-year deficit reduction package totaling more than $3 trillion. "We can't just cut our way out of this hole," the president said.

The president's proposal would predominantly hit upper income taxpayers but would also reduce spending in mandatory benefit programs, including Medicare and Medicaid, by $580 billion. It also counts savings of $1 trillion over 10 years from the withdrawal of troops from Iraq and Afghanistan.

Obama's recommendation to a joint congressional committee served as a sharp counterpoint to Republican lawmakers, who have insisted that tax increases should play no part in taming the nation's escalating national debt. Obama's plan would end Bush-era tax cuts for top earners and would limit their deductions.

"It's only right we ask everyone to pay their fair share," Obama said from the Rose Garden at the White House.

Responding to a complaint from Republicans about his proposed tax on the wealthy, Obama added: "This is not class warfare. It's math."

Obama vowed to veto any deficit reduction package that cuts benefits to Medicare recipients but does not contain revenue increases.

The Republican reaction was swift and derisive.

"Veto threats, a massive tax hike, phantom savings, and punting on entitlement reform is not a recipe for economic or job growth_or even meaningful deficit reduction," Senate Republican leader Mitch McConnell said in a statement issued minutes after the president's announcement. "The good news is that the Joint Committee is taking this issue far more seriously than the White House."

Obama's proposal comes amid Democratic demands that Obama take a tougher stance against Republicans. And while the plan stands little chance of passing Congress, its populist pitch is one that the White House believes the public can support.

The core of the president's plan totals just over $2 trillion in deficit reduction over 10 years. It would let Bush-era tax cuts for upper income earners expire, limit deductions for wealthier filers and close loopholes and end some corporate tax breaks. It also would cut $580 billion from mandatory programs, including $248 billion from Medicare. It also targets subsidies to farmers and benefits programs for federal employees.

Under Obama's plan, government spending would no longer add to the national debt starting in 2017.

Coupled with about $1 trillion in cuts already approved by Congress and signed by the president, overall deficit reduction would total more than $4 trillion, a number many economists cite as a minimum threshold to bring the nation's debt under control.

Key features of Obama's plan:

-$1.5 trillion in new revenue, which would include about $800 billion realized over 10 years from repealing the Bush-era tax rates for couples making more than $250,000. It also would place limits on deductions for wealthy filers and end certain corporate loopholes and subsidies for oil and gas companies.

-$580 billion in cuts in mandatory benefit programs, including $248 billion in Medicare and $72 billion in Medicaid and other health programs. Other mandatory benefit programs include farm subsidies and federal employee benefits.

-$430 billion in savings from lower interest payment on the national debt.

- $1 trillion in savings from drawing down military forces from Iraq and Afghanistan.

Increase your money and finance knowledge from home

Timing Your Spending

How to pay less by changing when you purchase.

View Course »

Advice for Recent College Grads

Prepare yourself for the "real world".

View Course »

TurboTax Articles

Are You Exempt From Health Care Coverage?

The Affordable Care Act, or Obamacare, is an individual mandate that requires all eligible Americans to have some form of basic health coverage by 2014. Those without insurance will receive a penalty when they file their tax returns ? that is, unless they have an exemption. TurboTax's Exemption Check can help you find out whether or not you qualify for an exemption.

Essential Tax Forms for the Affordable Care Act

The Affordable Care Act (ACA), also referred to as Obamacare, affects how millions of Americans will prepare their taxes in the new year. The law now includes penalties for all who haven?t obtained health insurance -- and those penalties are expected to be paid at tax time. The ACA also provides tax credits to help people pay for insurance, and you can claim those credits when you file your taxes. The Internal Revenue Service (IRS) has introduced a number of tax forms to accommodate the ACA.

Mortgage Refinance Tax Deductions

When refinancing a mortgage to get a lower interest rate or obtain more favorable loan terms, you're really just taking out a new loan and using the money to pay off your existing home loan. In general, the same tax deductions are available when you're refinancing a mortgage as when you're taking out a mortgage to buy a home.

How to Determine if You Have Minimum Essential Coverage (MEC)

The Affordable Care Act, also known as Obamacare, requires most Americans to have health insurance that meets a government standard known as "minimum essential coverage," or MEC. Whether your insurance qualifies as MEC depends not on the plan itself, but on how you obtained your coverage.

Rental Property Deductions You Can Take at Tax Time

Rental property often offers larger deductions and tax benefits than most investments. Many of these are overlooked by landlords at tax time. This can make a difference in making a profit or losing money on your real estate venture. If you own a rental property, the IRS allows you to deduct expenses you pay for the upkeep and maintenance of the property, conserving and managing the property, and other expenses deemed necessary and associated with property rental.

Add a Comment

*0 / 3000 Character Maximum

115 Comments

Filter by:
hjhf150

All of this is a catch 22 or a balloon effect,if you squeeze in one area it just gets bigger somewhere else.You're not going to get something for nothing.

September 24 2011 at 12:19 PM Report abuse rate up rate down Reply
rlbharman

You can always tell who is a Democrat. tax and spend more. Rendell the ex governnor of Pennsyvania and John clueless Corzine of New Jersey were shown to be nothing but liberal tax and spend take care oif the union democrats. Nobody hears from them because they were exposed as typical Democrat tax and give to my friends politicians. Thank God they are gone.2012 is coming.

September 20 2011 at 10:04 AM Report abuse rate up rate down Reply
Billy Goat

Before the rich get destroyed, let's ask this question. "Did u ever work for a poor man?"

September 20 2011 at 10:04 AM Report abuse +1 rate up rate down Reply
sanserve

Isn't this "two step" easier --- encourage large businesses to hire more people by giving them tax incentives --- no taxes, fees, etc in any year they increase their full-time employee numbers by 10%. Impose a 9% federal sales tax on everything other than food, shelter, and clothing (yes, this probably should be limited to essentials).

As to the "millionaire" tax. Millionaires spend and invest more money than any other group, indirectly creating jobs in all industries, and directtly in the service industries. They also donate more money to causes, charities, etc than anyone else possibly can. Increasing their income tax rate is economic suicide --- even for the non profits!

If you want to "soak" the rich and cut the expense of government, have a two tiered consumption tax system where "top shelf" items have a higher tax then standard fare, and where living essentials have no consumption tax at all. Eventually, the consumption tax would out perform the income tax AND eliminate the zero tax being paid within the underground economy.

Next, sell the Social Security monstrosity to the private sector for an amount equal to about twice the current trillions of IOUs. Then repay the IOUs and pocket the profit. The insurance industry would be charged with providing individual, fixed income annuities, which could be funded with far less money than is now being deducted from paychecks --- no employer match would be required either, (don't shout at me unless you understand the difference between fixed annuities and their much more speculative cousins).

Finally, increase consumer spending (the most powerful engine of economic growth) by eliminateing all taxes on any form of retirement income and any form of investment income.

September 20 2011 at 9:33 AM Report abuse +1 rate up rate down Reply
lchap17156

Try spending less, not taxing more.

September 20 2011 at 9:13 AM Report abuse +2 rate up rate down Reply
sfamilyent

Republican policies are misguided and their response was typical. Total taxes as a percentage of income decrease with higher income in the US. That is a fact. Shoot, people who earn more than the SS income cap pay lower effective payroll taxes than people who work part time at minimum wage jobs. And if I'm really wealthy and live off of my investments, I can pay lower federal income tax rates than people who work for a living and not have any payroll taxes...

Republicans need to stop working against tax reforms that will require higher income earning people to pay the same overall effective tax rates as regular people.

Republicans are hell bent on cutting social program spending that helps the elderly and low income families, letting our infrastructure decay, and protecting the income and wealth of high income earners and the wealthy - rather than looking for real solutions to reduce poverty, reduce unemployment, and to address the federal debt.

September 20 2011 at 9:08 AM Report abuse -3 rate up rate down Reply
G.Kunes

Obama forgot to include the savings in his most recent plan from concluding the Vietnam War. Credit his plan with
another Trillion savings!

September 20 2011 at 8:49 AM Report abuse rate up rate down Reply
thescot

Reward the 7th generation welfare rats and punish those who have worked hard to achieve what they have. There was a lot more sacrifice of family time to work and get rich than bein a seventh general welfare fraud.

September 20 2011 at 8:46 AM Report abuse +3 rate up rate down Reply
palyzuc

Warning Will Rogers !! This initiative is nothing more than a campaign ploy, you know, the mentality behind anything and everything that Obama does ! Wake up America!! Oh, by the way, should the Bamster get reelected, God help us, watch how quickly he jumps on the bandwagon of entitlements, ie., Social Security and Medicare. All you grey haired nitwits that helped him get elected in '08 will surely help him again in '12....and then he'll cut your proverbial...well lets just say you'll be paying a lot more for Medicare for a lot less coverage. Hope & Change !!

September 20 2011 at 8:28 AM Report abuse +2 rate up rate down Reply
John R Larson

WHEN has raising taxes in this type of economic downfall worked!! It only adds to the struggle that the middle class workers already suffer and whether it be the rich that are hit the hardest the effect will surly hit the pocket of those who struggle everyday to surrvive.. The poor are the only ones not effected.. but you still cant buy what you dont have and will have less of.. WHERE IS ALL THIS CASH GOING ANY WAY AND WHAT ABOUT WHAT WE ALREADY PAID OUT HAVE ANYONE SEEN ANYTHING COME OF IT EXCEPT POLITICIANS POCKETS!!

September 20 2011 at 6:40 AM Report abuse +4 rate up rate down Reply