- 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 »

Basics Of The Stock Market

Stock Market 101 - everything you need to know but were afraid to ask!

View Course »

TurboTax Articles

A Tax Guide for Solopreneurs: Self-Employed Tax Tips

Flying solo can be the ultimate business adventure. When you run your own business and you're the only employee, you truly hold all the cards and earn the freedom to achieve your ideal work-life balance. Working for yourself also brings tax advantages not available to those who work for others. It's important to understand the tax rules that apply to the self-employed to profit the most from these.

Can I Claim Medical Expenses on My Taxes?

Medical expenses can take a bite out of your budget, especially if you have unforeseen emergencies that are not fully covered by your insurance. The Internal Revenue Service allows taxpayers some relief, making some of these expenses partly tax-deductible. To take advantage of this tax deduction, you need to know what counts as a medical expense and how to claim the deduction.

What Is a 1099-G Tax Form?

The most common use of the 1099-G is to report unemployment compensation as well as any state or local income tax refunds you received that year.

Add a Comment

*0 / 3000 Character Maximum


Filter by:

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

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

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

Try spending less, not taxing more.

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

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

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

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

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