President Barack Obama called for an overhaul of the U.S. tax code for individuals and businesses and said he wants to raise an additional 1 trillion US dollars through tax increases over the next decade.
Obama in a speech Wednesday urged Congress to raise money by eliminating so-called tax expenditures, which would generate revenue that could be used to reduce tax rates and also increase the government’s take from the economy. He didn’t provide details about which tax breaks he would curtail or eliminate.
The largest US tax expenditures include the deductions for mortgage interest and charitable contributions and the exclusion for employer-provided health insurance.
Tax increases would make up about 1 trillion of the 4 trillion USD in additional deficit reduction Obama is seeking over the next decade. They would come on top of the tax increases proposed in the budget he released Feb. 14, which included limits on itemized deductions and higher rates for taxpayers in the top two tax brackets. The blueprint he announced is similar to one used by the fiscal commission Obama appointed last year.
“I believe reform should protect the middle class, promote economic growth, and build on the fiscal commission’s model of reducing tax expenditures so that there is enough savings to both lower rates and lower the deficit,” Obama said in his remarks at George Washington University in the capital.
Until now, Obama’s calls for a tax overhaul had focused on the corporate tax code and on allowing income tax rates for high earners to rise in 2013. Under current law, all of the income tax cuts that were extended last year would revert to pre-2001 levels at the end of 2012. He reiterated his support for those policies.
“I agreed to extend the tax cuts for the wealthiest Americans because it was the only way I could prevent a tax hike on middle-class Americans,” Obama said. “But we cannot afford one trillion USD worth of tax cuts for every millionaire and billionaire in our society. We can’t afford it. And I refuse to renew them again.”
Obama’s support for revenue-raising tax changes puts him at odds with many congressional Republicans, including House Majority Leader Eric Cantor of Virginia and Senator Orrin Hatch of Utah, the top Republican on the Finance Committee. These Republican leaders contend that all deficit reduction should be accomplished through spending cuts.
“There’s been a lot of discussion about the need to raise taxes,” House Speaker John Boehner, an Ohio Republican, said on Wednesday. “And I’ll just say this: We can’t tax the very people that we expect to reinvest in our economy and to create jobs. Washington has a spending problem, not a revenue problem.”
Obama responded to some of that criticism during his speech. “It’s just an article of faith to them,” he said. “I say that at a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more. I don’t need another tax cut”•