President Barack Obama has reiterated his call for high earners in the US to pay more in taxes, in his first news conference since winning re-election.
Barack Obama called for quick legislation to rule out tax rises on the first $250,000 of income, but refused to extend cuts for the wealthiest 2%.
“We should not hold the middle class hostage while we debate tax cuts for the wealthy,” he said.
The US faces an end-of-year “fiscal cliff” of spending cuts and tax rises.
The fiscal cliff would see the George W. Bush-era tax cuts expire in combination with automatic, across-the-board reductions to military and domestic spending.
Some $607 billion of savings and tax rises are planned, including reductions in the defence budget, the end of an employee tax holiday, changes to Medicare allowances and higher personal taxes.
The lower paid are set to lose some child and income credits, but Barack Obama has made fewer references to other portions of the stimulus deal set to expire beyond the tax cuts.
The fiscal cliff is due to take effect because Congress failed to reach a deal on deficit reduction after a stand-off over the US debt ceiling in mid-2011.
Congressional Republicans have said since last week’s US elections that they are open to raising revenue through tax reform and closure of loopholes, but oppose tax rises on the wealthy.
Glenn Hubbard, an economic adviser to Republican Mitt Romney’s failed presidential bid, writing in the Financial Times, called on fellow Republicans to accept the need for the rich to pay more tax, albeit through closing loopholes such as tax deductions.
Other Republicans favor ending the right of Americans to deduct mortgage interest payments from their taxable income – something analysts say is likely to hurt the middle classes far more than top earners.
During his news conference on Wednesday, Barack Obama was dismissive of a loophole-only reform, telling reporters that “the math tends not to work” in helping to cut the deficit.
“It really is arithmetic, not calculus,” he said.
The president has long opposed extending the Bush-era tax cuts for earnings above $250,000 a year, but gave into Republican demands in 2010 when the cuts were last up for renewal.
On Wednesday, Barack Obama said that would not happen this time.
“A modest tax increase on the wealthy is not going to break their backs,” he said.
“They’ll still be wealthy.”
But the president said he was confident that the White House and Congress could reach a deal before 1 January to avoid the “fiscal cliff”, as the US economy could not afford it coming to pass.
Barack Obama suggested the immediate extension of all the expiring tax cuts except the top rate, followed by a more comprehensive reform of the tax code as well as some of the US’ largest benefits programmes, including Social Security in 2013.
In doing so, he distanced himself from some in his own party who want the combined tax rises and cuts to happen, in order to give Barack Obama a better negotiating position.
On Tuesday, US Treasury Secretary Timothy Geithner warned against extending all of the tax breaks that are due to expire in January as a way of giving Washington more time to broker a deal on the deficit.
Timothy Geithner claimed doing this would create more uncertainty in the financial markets.
House Speaker John Boehner has scheduled a response to Barack Obama on Wednesday, as the White House planned to meet with congressional leaders on Friday, when both sides are expected to designate aides in search of a compromise.
Barack Obama met on Tuesday with allies from labor and liberal groups, and also invited a group of chief executives to the White House.
Earlier, Democratic Senator Dick Durbin of Illinois said that “many Republicans believe now is the time to sit down and talk more revenue”, saying up to 20 Republican senators are willing to work towards accommodation.
But Senator Dick Durbin said “there is a great distance” between Republicans in the House and Senate.
“Basically it comes down to the question of whether Speaker Boehner is willing to look for a bipartisan solution.”
Deficit
The amount by which spending exceeds income over the course of a year.
In the case of trade, it refers to exports minus imports. In the case of the government budget, it equals the amount the government needs to borrow during the year to fund its spending. The government’s “primary” deficit means the amount it needs to borrow to cover general government expenditure, excluding interest payments on debts. The primary deficit therefore indicates whether a government will run out of cash if it is no longer able to borrow and decides to stop repaying its debts.
[youtube 01zClkV1n24]
