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Tax the rich, Obama says; class warfare, says foes

By Jim Kuhnhenn

Associated Press

Published: Monday, Sept. 19 2011 9:55 p.m. MDT

Either way, Obama is unlikely to get his way. The committee would be hard pressed to undertake a wholesale restructuring of the tax code by its late November deadline. And the president's own proposals have little chance of making their way out of Congress intact.

But with Bush-era tax cuts set to expire at the end of 2012 and with deep defense cuts scheduled to take effect in 2013 if the joint committee fails to act, Obama set down clear lines for next year's elections. And by threatening to veto Medicare benefit cuts that aren't paired with tax increases, he raised the pressure on the committee to include revenues in its plan.

"I will not support any plan that puts all the burden for closing our deficit on ordinary Americans," he said.

The plan represents Obama's opening bid in the debate. Administration officials say he is not taking other deficit reduction measures, including a gradual increase in the eligibility age for Medicare from 65 to 67, off the table. In deficit reduction negotiations in July with Boehner that centered on raising the nation's borrowing capacity, Obama had agreed to such an age increase. But other Democrats objected loudly and said it would neutralize their criticism of a Republican plan to overhaul Medicare.

The core of the president's plan totals just over $2 trillion in deficit reduction over 10 years. It would let Bush-era tax cuts for upper income earners expire, limit tax deductions for wealthier filers and close loopholes and end some corporate tax breaks. It also would trim mandatory programs, including Medicare. And it would target subsidies for farmers and retirement benefits for federal employees.

Officials cast Obama's plan as his vision for deficit reduction, and distinguished it from the negotiations he had with Boehner in July as Obama sought to avoid a government default. Those talks failed, but resulted in an agreement to trim $1 trillion from government programs.

Democrats, who had warily watched as Obama negotiated with Boehner, cheered the president's tough talk on Monday.

"The president put down a marker today, and he did it in terms more forceful than we have seen from him before," said Sen. Chuck Schumer of New York.

Illustrating Obama's populist pitch on taxes, he also suggested that Congress establish a minimum tax on taxpayers making $1 million or more in income. The measure — the White House calls it the "Buffett Rule" for billionaire investor Warren Buffett — is designed to prevent millionaires from taking advantage of lower tax rates on investment earnings than what middle-income taxpayers pay on their wages.

On average, however, the wealthiest people in America pay a lot more in taxes than the middle class or the poor, according to the non-partisan Tax Policy Center. This year, households making more than $1 million will pay, on average, 29.1 percent of their income in federal taxes. A household making between $50,000 and $75,000 will pay 15 percent of its income in federal taxes, which includes income taxes and Social Security payroll taxes.

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Associated Press writers Stephen Ohlemacher, Ricardo Alonso-Zaldivar, Sam Hananel, and Andrew Taylor in Washington, and Daniel Sewell in Cincinnati contributed to this report.

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