President Barack Obama wants to clamp down on tax breaks for the wealthiest Americans and some businesses in order to pay for his $447bn jobs package, setting up a clash with Republicans in the battle over new stimulus for the US economy.
Jack Lew, White House budget director, said the president was proposing to cover the cost of the short-term stimulus for the ailing US economy with $467bn in additional revenues over the next 10 years. Most of the savings – worth about $400bn – would come from limits to the ability of American households earning more than $250,000 per year to deduct items such as mortgage interest and charitable donations from their taxes.
The remainder would come from taxing so-called “carried interest”, or the profits generated by private equity executives, hedge fund managers, and property investors, at the higher ordinary income rate, rather than at lower capital gains rates. Oil companies and corporate jet owners would also see their tax breaks shrink under the Obama administration’s plan.
Surrounded by construction workers, teachers and small business owners on Monday, Mr Obama demanded quick action as he announced he was sending lawmakers the full text of the legislation he outlined in a speech last week.
“No games, no politics, no delays,” said Mr Obama. “This is the bill that will help our economy in a moment of national crisis.”
The bulk of the tax proposals had already been put forward by the White House over the past two years, but Republicans – and even some Democrats – had rejected them.
“We remain eager to work together on ways to support job growth, but this proposal doesn’t appear to have been offered in that bipartisan spirit,” said a spokesman for John Boehner, the Republican speaker of the House of Representatives.
The path to enactment of the jobs bill remains fraught with obstacles, despite the fact that Republicans have been relatively conciliatory on the content of the stimulus package, which includes a mix of payroll tax cuts for workers and businesses, as well as new spending on infrastructure and aid to cash-strapped states.
Mr Obama said the US must decide where its priorities lay to strengthen the economy: “Do we keep tax loopholes for oil companies or do we put teachers back to work?”
Next week, the White House will also detail an additional $1,500bn in measures to put US long-term finances on a more sustainable path, which it will submit to a 12-member congressional committee charged with achieving that goal by late November.
One big question is how far the Obama administration will go in seeking cuts to Medicare, Medicaid and Social Security – the most costly government health and pension schemes. Moving aggressively to propose reforms to those programmes may help bring Republicans along but members of his own Democrats may balk. A framework for reforming the tax code could also be part of that plan.