US & Canada

Obama plans taxes and spending cuts to reduce deficit

President Barack Obama - 16 September 2011
Image caption President Obama's call for tax increases will face opposition from Republicans in Congress

President Barack Obama is to unveil plans to cut the US deficit by more than $3tn (£1.9tn) in the next decade.

A White House official said his proposals include an overhaul of the tax code that would raise $1.5tn.

The official said the president would not agree to cuts in health care for the elderly if there were no provisions for rich Americans to pay more tax.

Republicans in Congress have already said they will not agree to any plans to increase taxes.

Mr Obama's plans will be submitted to a congressional deficit-reduction "super-committee" already considering how to cut $1.5tn from the budget deficit.

The committee faces a November deadline to find savings and is not obliged to accept the president's ideas.

The president is scheduled to announce his long-term deficit reduction plan at the White House at 10:30 (14:30 GMT) on Monday.

The proposals being unveiled on Monday are a mix of cuts to spending and tax code changes that would increase rates on the rich.

They include nearly $250bn in cuts to Medicare spending - the healthcare programme for the elderly.

But those cuts will depend on the approval of his plans to raise new tax revenue from high-earners and corporations, reports say.

"He will veto any bill that takes one dime from the Medicare benefits seniors rely on without asking the wealthiest Americans and biggest corporations to pay their fair share," Reuters news agency quoted an Obama administration official as saying.

The $3tn figure includes an estimated $1tn of savings over the next decade from the expected withdrawal of military forces from Iraq and Afghanistan.

Closing loopholes

Over the weekend officials provided journalists with a preview of what the president's plan includes.

On Saturday, officials said Mr Obama wanted a "Buffett Rule" that would see Americans who earn more than $1m pay the same share of tax as those who earn less.

The proposal refers to billionaire financier Warren Buffett, who has complained that he and his wealthy peers pay relatively less tax than the people who work for them.

Many high-income Americans benefit from tax loopholes that see earnings on investment taxed at lower rates than wages.

But its unclear how much such a rule would increase revenues, as the administration will not give specific details on how it would be implemented, calling it one of the guiding principles of tax code reform.

Republicans roundly criticised the president's plans, with Paul Ryan, who chairs the House of Representatives budget committee, describing them as "class warfare."

"It is disappointing the president has nothing but a fresh slogan for the same job killing small-business tax hikes opposed by bipartisan majorities in Congress," said Michael Steel, spokesman for House Speaker John Boehner.

Last week Mr Boehner said any tax increases were "off the table".

The US economy has been growing only slowly while the unemployment rate remains stubbornly high, above 9%. Facing an election next year, Mr Obama has had a battle in Congress over how to reduce the ballooning deficit while the economy remains stagnant.

Ratings agency Standard and Poor's cut the US AAA rating in August after the country went to the brink of a default over an extended battle in Congress over raising the government's debt limit.

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