Obama Won’t Budge on Top Tax Rates

  • Share
  • Read Later
Chip Somodevilla / Getty Images

U.S. President Barack Obama with Delaware Gov. Jack Markell in the Roosevelt Room at the White House on Dec. 4, 2012. President Obama met with members of the U.S. Governors Association Executive Committee to discuss the "fiscal cliff".

Barack Obama dug in Tuesday on his demand that any bargain to avert the so-called fiscal cliff include an agreement to raise taxes on the wealthiest Americans, warning that a deal would not be reached before the Jan. 1 deadline unless Republicans dropped their opposition to the rate hike.

In his first interview since winning re-election last month, Obama said he was prepared to make painful unspecified cuts to government spending and social programs in order to rein in the deficit. But in order to forge a pact to sidestep austerity in the new year, Obama said, Republicans would have to accede to his demand that tax rates on the wealthiest 2% of Americans rise.

“The issue right now that’s relevant is the acknowledgment that if we’re going to raise revenues that are sufficient to balance with the very tough cuts that we’ve already made, and the further reforms in entitlements that I’m prepared to make, that we’re going to have to see the rates on the top 2 percent go up,” Obama told Bloomberg Television’s Juliana Goldman. “And we’re not going to be able to get a deal without it.” The President has already vowed to veto a deal that doesn’t include such a provision.

With less than a month before the U.S. faces a self-inflicted combination of sharp spending cuts and the expiration of Bush-era tax cuts, negotiators have adopted a bearish public tone about the prospects for a deal. The haggling has gone “nowhere,” House Speaker John Boehner groused on Sunday. Both Boehner and the President have put forth opening bids, with Obama asking for $1.6 trillion in tax increases over the next decade in a deal that precludes Medicare and Social Security cuts to beneficiaries and the House Speaker proposing to cut $600 billion from federal health programs over 10 years while raising $800 billion in revenue by limiting deductions and closing loopholes in the tax code. As expected, these offers were swiftly rejected by the opposing side. They are public markers that reflect the two parties’ long-established priorities.

Obama said Tuesday that Boehner’s offer was “out of balance.” He couched his objection not in ideological terms, but actuarial ones. “It’s not me being stubborn. It’s not me being partisan. It’s just a matter of math,” he said. “What I’m going to need, what the country needs, what the business community needs to get to where we need to be is the acknowledgement that folks like me can afford to pay a little higher rate.”

Obama argued that raising revenue exclusively through closing tax loopholes would not yield sufficient savings. “When you look at how much revenue you can actually raise by closing loopholes and deductions, it’s probably in the range of $300 billion to $400 billion,” Obama said. “That’s not enough to come up with a balanced plan that actually reduces the deficit and puts us on the path of long-term stability.”

Many of the loopholes and deductions Republicans would need to target to achieve a higher level of revenue are important ones, he said, including charitable deductions that many institutions rely on to preserve giving. “If you eliminated charitable deductions, that means every hospital and university and not-for-profit agency across the country would suddenly find themselves on the verge of collapse. So that’s not a realistic option.”

While Obama’s stance on taxes was insistent, he stressed that he was open to compromise in other areas, recognizing that “I’m not going to get 100%” of what Democrats want. The President can afford his tough line on taxes, however, because his position on the expiration of the George W. Bush-era tax cuts is strong. Without a deal, rates on all Americans would rise next year. A majority of Americans agree with Obama’s contention that the top tax bracket can afford to fork over more, an idea on which he campaigned extensively. (Notably, Obama suggested he would be open to lowering rates somewhat in 2013 if other elements of a deal were agreeable.) Acknowledging Obama holds an advantage on the issue, Republican Congressman Tom Cole of Oklahoma, a staunch conservative, argued last week that the GOP should capitulate on taxes for the wealthy in an effort to avert the cliff and avoid dealing the economy a blow that could thrust it back into a recession — and avoid the political blowback that would accompany it.

Despite the despairing tone of some of the negotiators’ public pronouncements, the contours of a deal are beginning to take shape, with revenues and federal spending cuts likely to fall somewhere between the markers laid by Obama and Boehner. In the Bloomberg interview, Obama indicated a deal to reduce the nation’s long-term deficits would be a two-phase effort, with an initial pact to resolve the immediate crisis before Jan. 1, under which tax rates for the wealthy would increase.

Then next year negotiators would get down to the tricky business of cutting deals on entitlement and tax reform that would achieve a total of some $4 trillion in savings over the next decade. “When you look at what Ronald Reagan did, back in 1986, working with Bill Bradley and others, that was a year-and-a-half process,” Obama said. “So what I’ve suggested is, let’s essentially put a down payment. On taxes, let’s let tax rates on the upper-income folks go up.” For the President, a deal begins with that stipulation. Without it, he says he won’t budge.