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Obama Talks Tough on Taxes -- With an Eye on Ohio-Ky. Bridge

Obama Talks Tough on Taxes -- With an Eye on Ohio-Ky. Bridge

By Alexis Simendinger - September 20, 2011

When President Obama began his week with a veto threat, as he did Monday, and planned to end it with a visit to a bridge, as he will do on Thursday, it's natural to ask what he hopes to accomplish, since both involve Congress.

Obama's campaign to woo and compromise with the legislative branch during a poisonous period of divided government appears to be behind him. His combative phase -- an effort to take a sharp message to the American people to explain the political repercussions of congressional inaction -- is the new strategy.

Whether Democrats and Republicans can agree to shrink future deficits, and also help the economy create more jobs by spending some federal dollars, is up in the air. Gridlock could be the outcome by the end of this year. And if that’s the case, Obama wants voters to give him some credit for what he wanted to accomplish, and to blame conservatives in Congress for putting politics over country.

So, in the Rose Garden on Monday, the president explained his 10-year plan to identify another $3 trillion in proposed budget savings, mostly by raising taxes on the rich and cutting up the credit cards for the wars in Iraq and Afghanistan. His plan, he said, could be added to the $1.2 trillion in spending cuts he and Congress enacted in August as part of the debt-ceiling pact.

“It’s a plan that reduces our debt by more than $4 trillion, and achieves these savings in a way that is fair -- by asking everybody to do their part so that no one has to bear too much of the burden on their own,” Obama told about 200 Democratic admirers and activists at the White House. “All told, this plan cuts $2 in spending for every dollar in new revenues.”

Congressional Republicans have said that raising taxes is out of the question, period, because it would harm the fragile economy. Obama is challenging conservatives to defend their no-new-taxes pledge on grounds of fairness.

“Anyone who has signed some pledge to protect every single tax loophole so long as they live, they should be called out,” he said. “They should have to defend that unfairness -- explain why somebody who's making $50 million a year in the financial markets should be paying 15 percent on their taxes, when a teacher making $50,000 a year is paying more than that -- paying a higher rate.”

The president, in effect, decided to make the deficit-cutting job more challenging for Congress. The 12-member joint panel now negotiating to reach a deal under the rules set up by the debt-ceiling pact can ignore Obama’s deficit ideas and his rhetoric, but probably not his veto threats. The president set the overall target higher than the panel’s mandate (at a net total of $4 trillion); added $1.5 trillion in “comprehensive” tax reform to the mix, but with tax hikes in addition to tax cuts; and in a direct bow to his Democratic base, removed significant entitlement changes from a 10-year plan to curb the deficit.

By law, the 12 lawmakers on the “super committee” must hatch a plan by Thanksgiving worth at least $1.2 trillion, and Congress is required to vote on it by the end of December. If a simple majority of the joint committee fails to agree on proposals, or Congress does not adopt the recommendations, across-the-board cuts to spending programs will take place in 2013. As a backdrop, the Bush tax cuts that were extended through 2012 for middle- and upper-income Americans are set to expire. Obama said he supports eliminating the Bush breaks for the wealthy (to raise $866 billion in revenues, according to the White House), but the president wants the tax cut for middle-class families to remain in place (earlier estimates had pegged 10-year costs at $2.7 trillion).

The administration has dubbed the tax fairness argument the “Buffett rule,” a nod to billionaire Warren Buffett, who has repeatedly said that any tax system that makes his secretary pay a higher tax rate on her income than he pays needs a drastic fix.

With adoption of tax “reforms” (the Obama administration avoided being too specific in the plan it released), the disparity Buffett has identified between the tax rate on ordinary income and the tax rate on investment earnings could be erased if Americans earning more than $1 million paid higher taxes, according to the administration.

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Alexis Simendinger covers the White House for RealClearPolitics. She can be reached at asimendinger@realclearpolitics.com. Follow her on Twitter @ASimendinger.

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