Reducing Budget Deficit By Increasing Taxes

Obama: Taxes should be increased to reduce debt

In order to pay-off the 15 trillion dollar federal debt and cut down the government’s one trillion dollar budget deficit, taxes should be increased to generate more revenue. The president was expressing his views to a group of business executives.

While speaking to members of the Business Roundtable, President Obama insisted that although his administration is working on a plan to cut spending, strategies to increase revenue should also be put in place.

Taxes will have a big impact on the outcome of 2012 elections.

All the potential Republican flag bearers Romney, Gingrich, Santorum and Ron Paul oppose tax increases. This means that the president will face a tough battle when campaigning for reelection.

There have been budget crises between the White House and Congressional Republicans who oppose tax hikes.

Whatever the outcome of the elections, there will be tax changes in December.

Payroll tax spearheaded by the Obama administration will come to an end while Bush tax cuts will also expire before the year ends.

President Obama wants to entrench the Buffet rule into the country’s tax code. If this happens, people making more than a million dollars annually will be forced to pay a flat rate of 30 percent in taxes. The president also plans to phase out Bush tax cuts for taxpayers with an annual income of more than 200,000 dollars or couples who make a total of 250,000 dollars annually.

The president claims that he only seeks a balanced approach towards tax collection:

President Obama is of the opinion that a simple adjustment can be made to the tax code to help in stabilizing the government.

House Republicans On The Offensive Following Extended Tax Fight

Congressional Republicans are looking to change the subject, following a long, drawn out battle over cuts in 2012 taxes. They are doing so by pushing for new legislation, that they propose will promote transportation and energy projects, not only creating jobs but also cutting taxes for cash-strapped businesses.

On the other side, Democrats are hoping to continue their winning record by pushing  Republicans to vote on jobs programs that would be financed by increasing taxes on the rich. During an election year, this might just be a winning strategy.

The parties’ differing uses of legislative power serve to emphasize the conclusions that each party took away following the brawl over new payroll taxes, which ended only when Congress finally passed on a $143 billion package to President Obama.  The bill also included a payroll tax cut of 2%, and provisions to preserve extended unemployment benefits for those who have been unable to find a job in the long-term. An additional provision will prevent Medicare from decreasing payments to participating doctors.

Until the Republicans dropped their, previously ardent demands for hefty spending cuts, the Democrats had succeeded in presenting the opposing party as opponents of a tax break that would benefit most middle-class Americans. Not a good spot for the Republicans to be in during an important election year.

This puts the GOP in a position where they feel that they need to get the voter’s attention focused on other issues. In this case, they point primarily to what they cite as the failure of President Obama’s jobs and economic stimulus plans.

To this end, House GOP members are working hard to push threw bills that put job growth at the top of the agenda. Examples of this strategy include a $460 billion dollar transportation bill that is linked to additional oil drilling legislation.

But the odds of them passing this legislation, particularly a bill that addresses oil billing, are almost zero. Nonetheless, House Republicans will continue to present themselves as the pro-job party.

Popularity Of Millionaire Tax

Polls show the millionaire tax and spending cuts are popular.

In general, people are in favor of President Obama’s proposal to increase millionaires’ taxes, but are still more in favor of spending cuts, as shown by an Associated Press-GfK poll. This gives Republicans an advantage over Democrats in the ongoing battle over the economy.

The poll shows that while the President’s proposed millionaire tax is generally popular, the plan does not effectively change the partisan views of public towards the $1 trillion yearly deficit.

Republican and retired New Jersey Mike Whittles said in support of the tax proposal, “Everybody should be called to sacrifice.” Still, Whittles said, he’d prefer spending and government waste reduced first.

Obama’s plan to impose at least a 30 percent income tax for millionaires was favored by 65 percent of the people polled by AP-GfK, while only 26 percent were opposed.

However, 56 percent as opposed to 31 percent approved of cuts in government spending rather than higher taxes — a small shift from the previous year’s poll.

Overall, people had a more optimistic view of Democrats than Republicans and positivity towards Obama as the presidential election approaches. Democrats received 54 percent favorable responses while Republicans had only 46 percent, corresponding with the results of a January 2011 poll.

Obama’s plan has little chance of passing in Congress despite Democratic support. Still, the proposal unifies Democrats in their opposition to GOP plans to lower top income earners’ taxes.

The 2012 taxes proposal was nicknamed the Buffet Rule since billionaire Warren Buffet is a supporter of higher taxes for the wealthy. The wealthy GOP candidate Mitt Romney released his tax returns to show he paid 15 percent.

Nearly two-thirds of independents and two-fifths of Republicans approve of Obama’s proposal. In addition, 60 percent of whites and 50 percent of conservatives back the plan, groups who generally support the GOP, and also 60 percent of those who earn more than $100,000 a year.

Obama’s Proposals To Increase Tax Revenue

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.