WASHINGTON (AP) — President Barack Obama set up another clash with Republicans on Monday by proposing $1.5 trillion in new taxes aimed primarily at the wealthy as part of a $3 trillion package to shrink the U.S. national debt.
Obama’s plan has little chance of passing Congress, where Republicans control the House of Representatives. Republicans staunchly oppose tax increases and want greater spending cuts to reduce America’s debt.
Congress’ senior Republican, House Speaker John Boehner, has said no such legislation will pass the House.
The populist pitch in Obama’s speech, however, could offer political benefits ahead of next year’s elections. The plan could appeal to Americans, many of whom believe the deficit cannot be reduced by spending cuts alone, according to some polls. It also could energize Obama’s fellow Democrats, who have been clamoring for the president to take tougher positions against Republicans.
“We can’t just cut our way out of this hole,” the president said in a speech at the White House. He noted that he is among the millionaires who should face higher tax rates than the middle class and said: “It’s only right we ask everyone to pay their fair share.”
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. The new taxes predominantly would hit wealthy Americans, ending their Bush-era tax cuts and limiting their deductions.
The core of the president’s plan totals just more than $2 trillion in deficit reduction over 10 years. It combines the new taxes with $580 billion in cuts to mandatory benefit programs, including $248 billion from Medicare, the health insurance program for the elderly. It also counts savings of $1 trillion over 10 years from the withdrawal of U.S. troops from Iraq and Afghanistan.
The administration 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. He is submitting his deficit fighting plan to a special joint committee of Congress that is charged with recommending deficit reductions of up to $1.5 trillion over 10 years.
Republicans already were lining up against the president’s tax proposal before they even knew the magnitude of what he intended to recommend.
“Class warfare may make for really good politics but it makes for rotten economics,” Paul Ryan, chairman of the House Budget Committee, said Sunday in reaction to an Obama tax proposal to impose a minimum tax rate on wealthy filers.
Former President Bill Clinton dismissed on Monday Republican claims that the tax on the wealthy would discourage jobs creation and hamper economic growth.
“Republicans in Washington always say the same thing,” Clinton said on NBC’s “Today” show. He called their argument an insult to wealthy Americans, including many who don’t mind paying more.
One of Obama’s proposals would set a minimum tax on taxpayers making $1 million or more in income. Obama called the measure the “Buffett Rule” for billionaire investor Warren Buffett, who has spoken of the unfairness that he pays taxes at a lower rate than that paid by his secretary.
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.”