President Obama proposed that a unpopular category of taxes be replaced with one that raises 2012 taxes for the 1% of the wealthiest Americans.
His proposals asked for higher tax rates on estates, fund managers, and the gas and oil industries. Bush era cuts would be allowed to expire, and taxes on dividends for the wealthiest citizens would rise to ordinary levels.
The proposals put forth are the first phase of the White House plan to deal with a projected shortfall in tax revenue expected to occur after the presidential elections.
Incomes over $1 million would be taxed at a 30% rate as suggested by Warren Buffet. This proposal (The Buffet Rule) would negate the alternative minimum tax adopted in 1969. The plan was considered to be irrelevant because it was never indexed to take inflation into account. The result was a tax on middle class Americans that was complicated by many deductions and credits which forced Congress to take many temporary steps to fix the problem.
The loopholes may have made sense if the tax system had been completely revised. The wealthy needed to pay their fair share of taxes, and not attempt to avoid their fair share of tax responsibility, which is what the old rules allowed. Republicans regard Obama’s attempt as a form of class warfare, choosing instead to focus on reducing spending as opposed to agreeing with the democrat insistence on raising taxes by eliminating tax cuts.
The president was in favor of allowing the tax cuts of 2001 and 2003 to expire for individuals earning more than $200,000 annually and $250,000 for households. Upper income earners would see their deductions limited.