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Obama announces debt plan built on taxes on rich

By Jim Kuhnhenn

Associated Press

LAST UPDATED: 09:53 a.m. HST, Sep 19, 2011

WASHINGTON >> 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. He vowed to veto any deficit reduction package that cuts benefits to Medicare recipients but does not raise taxes on the wealthy and big corporations.

"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.

The deficit reduction plan represents an economic bookend to the $447 billion in tax cuts and new public works spending that Obama has proposed as a short-term measure to stimulate the economy and create jobs. And it gives the president a voice in a process that will be dominated by a joint congressional committee charged with recommending deficit reductions of up to $1.5 trillion.

His plan 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.

In issuing his threat to veto any Medicare benefits that aren't paired with tax increases on upper-income people, Obama said: "I will not support any plan that puts all the burden for closing our deficit on ordinary Americans."

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

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.

Officials cast Obama's plan as his vision for deficit reduction, and distinguished it from the negotiations he had with House Speaker John Boehner in July as Obama sought to avoid a government default.

As a result, Obama's proposal includes no changes in Social Security and no increase in the Medicare eligibility age, which the president had been willing to accept this summer.

Administration officials also said that Obama's $1.5 trillion in new taxes is a goal that Congress could achieve through a broad overhaul of the tax code. They said the president's specific proposals represent one way to get to that goal under the existing tax code.

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. Administration officials said 90 percent of the $248 billion in 10-year Medicare cuts would be squeezed from service providers. The plan does shift some additional costs to beneficiaries, but those changes would not start until 2017.

—$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.

Republicans have ridiculed the war savings as gimmicky, but House Republicans included them in their budget proposal this year and Boehner had agreed to count them as savings during debt ceiling negotiations with the president this summer.

Illustrating Obama's populist pitch on tax revenue, he suggested that Congress establish a minimum tax on taxpayers making $1 million or more in income. The measure — the White House calls it the "Buffett Rule" for billionaire investor Warren Buffett — is designed to prevent millionaires from taking advantage of lower tax rates on investment earnings than what middle-income taxpayers pay on their wages.

That minimum rate, however, is not included in the White House revenue projections. Officials said it was a suggestion for Congress if it were to undertake an overhaul of the tax code.

.At issue is the difference between a taxpayer's tax bracket and the effective tax rate that taxpayer pays. Millionaires face a 35 percent tax bracket, while middle income filers fall in the 15 or 25 percent bracket. But investment income is taxed at 15 percent and Buffett has complained that he and other wealthy people have been "coddled long enough" and shouldn't be paying a smaller share of their income in federal taxes than middle-class taxpayers.

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frontman wrote:
Taxing the rich.............they all ready pay 93% of all taxes collected. Why is it that 53%, under Obummer, only 48% under Bush, pay NO frderal taxes at all and get thousands in unearned income credits???? If one doesn't pay into a system, he has no rights in the system.
on September 19,2011 | 10:08AM
OldDiver wrote:
WHAT!!!!, President Obama wants the rich to have the same tax rate as teachers? The same tax rate as Police Officers? The same tax rate as our military service members? The same tax rate as firefighters? This is class warfare. How dare he suggest the rich pay the same rate as us common folk.
on September 19,2011 | 03:28PM
frontman wrote:
When the rich all ready pays 93% of all federal taxes and 53% of US workers pay no federal taxes under B.O. Something is wrong with this equation. Everyone should be paying into a tax structure that benefits the ones that pay NO taxes at all. Tax everyone equally...............only way it will work.
on September 19,2011 | 10:14AM
flanman wrote:
The Bush tax cuts didn't do what Republicans say they would. Let them expire. We've been "trickled" on long enough.
on September 19,2011 | 10:17AM
AhiPoke wrote:
"$430 billion in savings from lower interest payment on the national debt." This happens with no effort and shouldn't be counted. "$1 trillion in savings from drawing down military forces from Iraq and Afghanistan." I question how this is computed. Are they planning to discharge the returning troops? If not, this is BS. "Administration officials said 90 percent of the $248 billion in 10-year Medicare cuts would be squeezed from service providers." Attacking healthcare providers seems to be a popular strategy for Obama but IMO this will have a significant negative long-term impact. Medicare and medicaid are already amongst the lowest payers for services. Paying less will only encourage providers to stop taking patients covered by these payers. It's already happening and will get worse. "It also targets subsidies to farmers and benefits programs for federal employees." Now we're talking. Unfortunately, the $300B there is a drop in the bucket. "he suggested that Congress establish a minimum tax on taxpayers making $1 million or more in income". Instead of this why not revamp the entire tax code and eliminate most, if not all, of the special exemptions that congress has given to special interest? ""It's only right we ask everyone to pay their fair share," Obama said". Jury-rigging an already flawed tax code will not accomplish this. IMO, the bottom-line is, until we get people off of the entitlement mentality our fiscal problems will not go away. Clearly, for the president to leave social security off of his list of entitlements, he's playing politics.
on September 19,2011 | 10:37AM
Changalang wrote:
This comment has been deleted.
on September 19,2011 | 12:58PM
OldDiver wrote:
The "Second Great Republican Depression" is the Republican strategy to win back the White House.
on September 19,2011 | 03:30PM
islandsun wrote:
The big corporations and the rich need to carry more of the load because they are not creating jobs. Normally this would be a bad idea butt this is an unusual economy. The numbers show loss of jobs so they are not investing.
on September 19,2011 | 01:10PM
Loki wrote:
This guy is stupid. Worst President ever.
on September 19,2011 | 01:57PM
entrkn wrote:
The President is right on or on the right track... we voted for him and now we have to back him.
on September 19,2011 | 02:20PM
2Lolo wrote:
So what else is new in Oblama land. Of course he's stuck on taxing the rich (they gotta ...ah...pay their fair share) because he's a Commie! He's all about income redistribution (as heard in his comments to Joe the Plummer). He'll eventually turn the USA Soviet style. Obummah resents wealth creators and their wealth, except of course, for himself and Michelle. OB OWNS this debt fiasco. He went and spent like a fool, blowing money on massive project failures. This economic mess is his alone to fix and he only knows to tax and spend. In the meanwhile, his approval ratings continue to fall and GOP pick win 'solid' Democrat congressional seats. I guess these are all Bush's fault as well.
on September 19,2011 | 03:26PM
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