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Obama tax hike meets Democratic resistance
Associated Press
Issue date: 3/5/09 Section: News
WASHINGTON (AP) - President Barack Obama's proposal to limit itemized tax deductions for high earners is running into opposition from key Democrats in Congress who worry that charities and the housing market would be hurt.
Senate Finance Committee Chairman Max Baucus questioned Wednesday whether the proposal was viable, a day after his House counterpart also expressed reservations.
Treasury Secretary Timothy Geithner said tax increases on families making more than $250,000 a year are necessary to make a down payment on health care reform and to limit future budget deficits. But, he said, he was willing to work with lawmakers on proposals they objected to.
"We recognize there are other ways to do this," Geithner told the Finance Committee.
Baucus, a Montana Democrat, said he thought the administration would be flexible on the proposal. "They want health care reform as much as I do," he told reporters.
Geithner and White House budget director Peter Orszag returned to Capitol Hill on Wednesday for a second day of hearings on Obama's $3.6 trillion tax and spending proposal. Both faced tough questions about the tax package.
Obama's budget calls for setting aside $634 billion over the next 10 years as a down payment on health care reform. Half the money would come from tax increases on upper-income earners; the other half from cuts to Medicare and Medicaid.
Obama's budget calls for two tax increases on couples making more than $250,000 and individuals making more than $200,000. He wants to increase the top tax rates from 35 percent to 39.6 percent by allowing a tax cut enacted under President George W. Bush to expire in 2011.
He also wants to limit the deductions those families can claim for charitable donations, mortgage interest and state and local taxes.
Without the new limits, a taxpayer in the proposed 39.6 percent tax bracket could save $396 in taxes from a $1,000 reduction in taxable income. Obama wants to limit deductions to the 28 percent bracket, meaning the same taxpayer would save only $280.
Senate Finance Committee Chairman Max Baucus questioned Wednesday whether the proposal was viable, a day after his House counterpart also expressed reservations.
Treasury Secretary Timothy Geithner said tax increases on families making more than $250,000 a year are necessary to make a down payment on health care reform and to limit future budget deficits. But, he said, he was willing to work with lawmakers on proposals they objected to.
"We recognize there are other ways to do this," Geithner told the Finance Committee.
Baucus, a Montana Democrat, said he thought the administration would be flexible on the proposal. "They want health care reform as much as I do," he told reporters.
Geithner and White House budget director Peter Orszag returned to Capitol Hill on Wednesday for a second day of hearings on Obama's $3.6 trillion tax and spending proposal. Both faced tough questions about the tax package.
Obama's budget calls for setting aside $634 billion over the next 10 years as a down payment on health care reform. Half the money would come from tax increases on upper-income earners; the other half from cuts to Medicare and Medicaid.
Obama's budget calls for two tax increases on couples making more than $250,000 and individuals making more than $200,000. He wants to increase the top tax rates from 35 percent to 39.6 percent by allowing a tax cut enacted under President George W. Bush to expire in 2011.
He also wants to limit the deductions those families can claim for charitable donations, mortgage interest and state and local taxes.
Without the new limits, a taxpayer in the proposed 39.6 percent tax bracket could save $396 in taxes from a $1,000 reduction in taxable income. Obama wants to limit deductions to the 28 percent bracket, meaning the same taxpayer would save only $280.
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