WASHINGTON (AP) — President Barack Obama proposed tax increases on wealthy individuals and some corporations Monday, setting the stage for an ideological battle that won’t be resolved until after the November election — if then.
Obama’s proposed tax hikes put him at odds with the Republican presidential hopefuls. They have all called for tax packages that would lower taxes but possibly add to the federal deficit.
Obama’s 2013 budget proposal calls for a tax reform package that would increase revenue by $1.5 trillion over the next decade. Obama says he wants to simplify the tax code, lowering marginal tax rates while eliminating or reducing tax breaks enjoyed by wealthy individuals and U.S.-based multinational corporations.
Obama’s plan would allow Bush-era tax cuts for the wealthy to expire at the end of the year, and would impose a new rule that people making more than $1 million a year pay at least 30 percent of their income in taxes. The “Buffett” rule, named after billionaire investor Warren Buffett, would replace the alternative minimum tax, which was originally designed to ensure that wealthy families pay at least some tax.
The AMT, however, was never indexed for inflation, so Congress must adjust it each year to prevent it from hitting millions of middle income families.
“I believe that in our country, everyone must shoulder their fair share — especially those who have benefited the most from our economy,” Obama said in his budget message. “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.”
Obama’s tax proposals have no chance of passing a divided Congress in which most Republicans oppose all tax increases. Obama has included many of them in previous budget proposals, only to have them ignored by Congress.
Instead, Congress appears headed for another year-end showdown over whether to extend tax cuts first enacted under former President George W. Bush.
“The president offered a partisan, election-year budget that ratchets up spending while ignoring the biggest drivers of our debt and calls for massive tax increases on hardworking families and small businesses,” said House Majority Leader Eric Cantor, R-Va.
The tax cuts, which expire at the end of the year, affect taxpayers at every income level. Obama wants to extend them for individuals making less than $200,000 a year and married couples making less than $250,000. He wants to let the tax cuts expire for those who make more.
Obama’s rivals, including former Massachusetts Gov. Mitt Romney, have proposed tax plans that independent experts say would result in lower taxes for corporations and the wealthy.
Romney’s tax plan would make permanent all of the Bush-era tax cuts, including those for the wealthy. Romney’s plan, however, would reduce revenue by $180 billion in 2015, adding to the federal budget deficit, according to an analysis by the Tax Policy Center, a Washington think tank.
Romney’s campaign disputes the estimate, saying tax cuts in the plan would help improve the economy, leading to more revenue.