US President Obama on Sunday insisted that the nation needs additional tax revenue, some of which the government could acquire by closing or reducing loopholes and deductions.
“There is no doubt we need additional revenue, coupled with smart spending reductions in order to bring down our deficit,” the president said in an interview aired on CBS. “And we can do it in a gradual way so that it doesn’t have a huge impact.”
Obama suggested raising revenue through an overhaul of the tax code, which would include closing or tightening unspecified “loopholes” and deductions.
“If you combine those things together, then we can not only reduce our deficit but we can continue to invest in things like education and research and development that are going to help us grow – without raising rates again,” Obama said.
The president’s statement comes one month after signing into law the ‘fiscal cliff’ deal, which increases taxes on individuals making more than $400,000 a year and couples making more than $450,000. A new 3.8 percent tax will also be imposed on investment incomes for individuals making more than $200,000 a year and couples making more than $250,000, thereby bringing in more federal revenue than usual.
About 77 percent of American households will also pay higher federal taxes in 2013 due to an increase in federal payroll taxes that affect most taxpayers, but only the “one percent” wealthiest Americans will see a change in their tax code this April.
But while only the wealthiest Americans will be affected by tax hikes for the latest fiscal year, cutting deductions could affect anyone that is eligible for them. But the president only specified his desire to cut breaks on carried interests, which usually only the wealthiest Americans are eligible for. Obama said he would seek out deductions that are not available to all Americans, thereby singling out “carried” interest – the tax rate paid primarily by private equity managers, venture capital and real estate partnerships. Democrats have long demanded that carried interest be taxes as ordinary income, while Republicans have opposed the idea.
Many Americans are hesitant about paying additional taxes, but the president promised that his proposal would provide adequate revenue that would prevent another need for raising them.
“Can we close some loopholes and deductions that folks who are well connected and have a lot of accountants and lawyers can take advantage of so that they end up paying lower rates than a bus driver or a cop?” Obama said. “If you combine those things together a budget deal could reduce the deficit without raising rates again.”
While Obama did admit to the need to cut spending, he said tax revenues are equally important and that Congress should work together to create “a balanced approach” that would prescribe economic growth.
“Washington cannot continually operate under a cloud of crisis,” he said. “That freezes up consumers, it gets businesses worried. We can’t afford these self-inflicted wounds.”
But at a time when the unemployment rate has risen to 7.9 percent and the US economy last quarter contracted by 0.1 percent – the largest since the recession – few Americans like to hear about the government’s need for more tax revenue.
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