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.

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.