President Obama’s opening bid in negotiations to rein in the national debt and avoid the so-called “fiscal cliff” last week largely mirrored his previous budget proposals, angering Republicans who said the White House is not offering any new ideas or even the smallest concessions.
Treasury Secretary Timothy F. Geithner delivered the proposal to Capitol Hill on Thursday and included a one-page description of it in a tweet sent from the U.S. Treasury website’s Twitter account on Friday.
“The president’s budget reduces the deficit in a balanced away, by both cutting spending and raising revenues,” the document states. “To preserve the investments needed to create jobs, grow our economy and strengthen the middle class, the president’s budget closes loopholes and asks the wealthiest Americans to pay their fair share.”
Republicans immediately said the plan is a nonstarter.
A spokesman for Senate Minority Leader Mitch McConnell, Kentucky Republican, pointed out that every Democrat in Congress voted against a similar version of Mr. Obama’s budget earlier this year.
He also referred to Democratic disagreement on the level of income that should receive a tax hike — with some Democrats, including Rep. Charles E. Schumer of New York, arguing for a $1 million threshold. Meanwhile, Senate Finance Committee Chairman Max Baucus of Montana, is reportedly working to preserve existing estate-tax levels.
Overall, the president’s plan would reduce the nation’s borrowing by $4.5 billion over the next decade and includes $1.2 trillion in savings already in the works as part of previous spending agreements worked out with the Republican House.
The White House is pursuing $1.6 trillion in new revenue over the next decade. The plan’s largest revenue generator would produce an estimated $849 billion by allowing the Bush-era tax cuts to expire for individuals earning more than $200,000 — $250,000 for couples.
There is also a $359 billion cost allowed for extending the Bush-era tax cuts rates for all but the top 2 percent of income earners.
To make up for that, it would generate $584 billion by capping tax deductions for high-income earners at 28 percent, according to the one-page description put out by the U.S. Treasury on Friday and a tax lobbyist familiar with the administration’s talking points on the plan.
The White House wants to garner another $143 billion by setting the estate tax at 2009 levels, capping the per-person exclusion at $3.5 million and setting a top rate of 45 percent.
There’s also a plan to eliminate the benefit to manufacturers and other businesses known as the LIFO method, which stands for “last in, first out.” Existing law allows businesses that buy parts from others and stockpile them to use the tax basis for the highest-priced component, that they may have purchased months or years earlier for a cheaper price. By slashing this business tax benefit, Mr. Obama says they will find $74 billion in tax savings.
Consistent with Democratic rhetoric over the past few years as gas prices have gone up, the plan also targets the oil and gas industry by eliminating $30 billion in tax loopholes specifically for that industry.
In addition, the plan calls for reinstating taxes placed on oil and chemical companies for hazardous waste and cleanup that Congress refused to renew when they expired in 1995. The Superfund fund, first established 30 years ago to help clean up contaminated areas, reached its peak of $3.8 billion in 1996, but has since run dry.
Mr. Obama’s proposal also puts a bull’s-eye on the tax benefits that partners in private equity firms, hedge funds and real estate developments receive known as “carried interest.” That income is taxed at the 15 percent capital-gains rate, rather than at ordinary income rates. Getting rid of it would produce $13 billion for the nation’s coffers.