President Barack Obama has unveiled plans to cut the massive US deficit by trillions – with at least half the savings coming from higher tax revenue.
“Washington has to live within its means,” Obama said. “We have to cut what we can’t afford to pay for what really matters.”
He is going after the rich, taking his cue from billionaire investor Warren Buffett, who recently noted his tax rate is less than his employees because his income is from capital gains on investments taxed at a lower rate than wages.
Obama said: “Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett. There is no justification for it. It is wrong that in the United States of America a teacher, or a nurse or a construction worker who earns $50,000 (per year) should pay higher tax rates than somebody pulling in $50 million.”
In an article in the New York Times earlier this year, Buffett – who is one of the richest men in the world, and an informal adviser to the president – called for anyone making more than one million dollars a year to pay a higher rate of tax.
By targeting the richest Americans Obama hopes to galvanise his political supporters ahead of next year’s presidential election and to paint the Republicans as the party of the rich.
They are opposed to any tax hikes and want to cut spending on so-called entitlements – things like programmes for the poor and the elderly.
This sets up a brutal ideological battle over taxes and spending with the president saying he will block any cuts proposed for the government-run Medicare health programme for the elderly unless Republicans in Congress agrees to higher taxes on companies and the wealthy.
Obama said they should pay their “fair share” of taxes. “We are not going to have a one-sided deal that hurts the folks that are most vulnerable,” he added.
The political arguments have already started with the top Republican in Congress, House of Representatives Speaker John Boehner rejected Obama’s plan.
Boehner said it would fail to tackle long-term problems and would raise taxes.
He added that Obama “has not made a serious contribution” to the effort by a special bipartisan congressional committee that has been asked to make recommendations to reduce the deficit by $1.2 trillion over 10 years.