President Outlines Economic PlanSeptember 21, 2011
On Sept. 19, President Barack Obama presented a $4.4 trillion debt-reduction plan to Congress that includes $1.5 trillion in savings from the tax code and calls for a new, higher tax rate for millionaires and billionaires.
The $4.4 trillion is net deficit reduction above the American Jobs Act (S. 1549), which the president laid out in an address to Congress on Sept. 8. That proposal includes $447 billion in spending and tax reductions, including $240 billion from a payroll tax holiday, $49 billion from unemployment insurance extension and reforms, and about $100 billion of infrastructure spending, among other policies. The offsets in the jobs bill will be a subset of the tax proposals in the debt-reduction plan; so the $4.4 trillion in deficit reduction is net of the cost of the jobs bill.
Of the total, $1.2 trillion comes from discretionary spending cuts already enacted in August by the Budget Control Act of 2011; $580 billion in cuts from mandatory programs; $1.1 trillion from troop withdrawals; $1.5 trillion from tax reform; and $430 billion in interest savings payments on the federal debt. Overall, the president’s plan would produce net savings of more than $3 trillion over the next decade.
The president also stated that he is adopting a recent proposal by Warren Buffet to implement a new tax on individuals with income above $1 million. The “Buffet Rule” says that people making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay. The details on how to achieve this goal would be left to Congress, but it is included as one of five principles of tax reform laid out by the president. He also stated that comprehensive tax reform should include:
- Lower individual and corporate tax rates,
- Cut tax loopholes and special tax breaks,
- Boost job creation and growth, and,
- Increase overall tax revenues by $1.5 trillion
The administration indicated that $800 billion of the $1.5 trillion in new tax revenues would come from letting the current 2001 and 2003 tax rates expire for individuals with income above $200,000 ($250,000 for joint filers), $400 billion would come from limiting deductions and exclusions, and another $300 billion from loophole closers.
Besides including limiting deductions and exclusions for families earning more than $250,000; other measures consist of eliminating tax breaks for oil and gas companies; closing the carried-interest loophole for investment fund managers; and eliminating benefits for those who own corporate jets.
Additionally, President Obama said that he also would veto any deficit reduction plan that included Medicare cuts but no tax increases on wealthy Americans and corporations. Under his plan, changes to Medicare and Medicaid programs and other mandatory spending reductions would provide $580 billion in deficit savings. The White House said 90 percent of the Medicare savings, or $224 billion, would come from reducing overpayments.
President Obama called for consideration of his proposals by the Joint Select Committee on Deficit Reduction, the panel established by the recent Budget Control Act of 2011. The Deficit Reduction Committee is charged with recommending at least $1.2 trillion in deficit reductions by November 23. President Obama urged the panel to adopt the more than $3 trillion in deficit reductions projected by his plan.
The Joint Committee launched its website this week. Please click here to learn more about the Joint Committee, to submit messages to the committee and to retrieve information for upcoming hearings and events. Finally, the committee will hold a hearing on Sept. 22 on revenue options and reforming the tax code. The panel will hear testimony from Joint Committee on Taxation chief of staff Thomas Barthold.