Image: Barack Obama
Charles Dharapak  /  AP
President Barack Obama gestures during a news conference in the East Room of the White House in Washington, Wednesday, June 29, 2011.
updated 7/1/2011 4:23:47 PM ET 2011-07-01T20:23:47

President Barack Obama is renewing an old fight with the business community by insisting that $400 billion in tax increases be part of a deficit-reduction package. His proposals have languished on Capitol Hill, repeatedly blocked by Republicans, often with help from Democrats.

Some would raise big money. Limiting tax deductions for high-income families and small business owners could raise more than $200 billion over the next decade. Others are more symbolic, such as scaling back a tax break for companies that buy corporate jets.

The corporate jet proposal would raise $3 billion over the next decade, according to GOP congressional aides. That's a relatively small sum in the big scheme of Washington budgets, but Obama and Democrats call attention to it repeatedly in their effort to portray Republicans as defenders of corporate fat cats.

First Thoughts: Another summer of Obama's discontent?

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No matter how Democrats characterize their proposals as revenue raisers or plugging tax loopholes, GOP leaders oppose them all, arguing that raising taxes in a bad economy would only make matters worse.

"If we choose to keep those tax breaks for millionaires and billionaires, if we choose to keep a tax break for corporate jet owners, if we choose to keep tax breaks for oil and natural gas companies that are making hundreds of billions of dollars," Obama said this week, "then that means we've got to cut some kids off from getting a college scholarship, that means we've got to stop funding certain grants for medical research, that means that food safety may be compromised, that means that Medicare has to bear a greater part of the burden."

The White House has identified about $600 billion in tax increases it wants over the next decade. About $400 billion of them were offered as part of deficit-reduction talks led by Vice President Joe Biden. That would be paired with more than $1 trillion in spending cuts.

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Some of the tax proposals are vague and budget experts have yet to calculate just how much they would raise. For example, limiting deductions for high-income families and small businesses could raise anywhere between $210 billion and $290 billion, depending on what threshold is established as high income.

Obama is proposing to eliminate $41 billion in tax breaks for oil and natural gas companies, raise taxes on investment fund managers by $21 billion and change the way many businesses value their inventories for tax purposes. The change in inventory accounting would raise an estimated $70 billion over the next decade, hitting manufacturers and energy companies, among others.

Treasury Secretary Timothy Geithner has given Congress an Aug. 2 deadline for raising the current debt ceiling, currently $14.3 trillion, to avoid defaulting on the government's financial obligations for the first time in the nation's history. He warns that a default could trigger potentially dire consequences for an already anemic economy, including higher interest rates, tighter credit and new rounds of job layoffs. The government hit the debt ceiling in May and has been juggling accounts since then to make all its payments.

Obama says he is proposing a balanced approach that spreads the pain among people who rely on government services and those most able to finance them.

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While Republican leaders argue that raising taxes is bad policy, bad politics and too unpopular to pass the Republican-controlled House, several GOP senators have said they are willing to consider eliminating unspecified tax breaks to reduce the deficit.

Two weeks ago, 33 Republican senators joined a 73-27 majority to repeal a $5 billion annual tax subsidy for ethanol gasoline blends. On Wednesday, Sen. Ron Johnson, R-Wis., said, "I would like to do away with special tax breaks but not legitimate business deductions."

But GOP leaders insist there is no support among Republicans to impose the kind of tax increases Obama is proposing.

"The president is sorely mistaken if he believes a bill to raise the debt ceiling and raise taxes would pass the House," Speaker John Boehner, R-Ohio, said. "The votes simply aren't there, and they aren't going to be there because the American people know tax hikes destroy jobs."

Video: Rankled Republicans strike back against Obama (on this page)

Among the tax increases proposed by the White House and the amount they'd raise over the next decade:

— Limit itemized deductions, including those for charitable contributions and mortgage interest, for families and small business owners with high incomes. Under current law, if a taxpayer's top income tax rate is 35 percent — the highest rate — a $100 deduction is worth $35 in tax savings. For several years, Obama has proposed limiting itemized deductions for people making above $250,000 to 28 percent, meaning a $100 deduction would be worth only $28 in tax savings at most. That would raise $293 billion, according to congressional estimates.

A similar proposal would gradually phase out itemized deductions for people making more than $500,000, raising "in the ballpark of $210 billion," said Maryland Rep. Chris Van Hollen, one of the House Democratic negotiators in the Biden talks.

— Change the way businesses value their inventory, raising an estimated $70 billion. Current law allows businesses to lower their taxable profits — and their tax bills — by using an accounting method that can inflate the cost of goods sold. Obama proposes to phase out the practice, known as last-in, first out, or LIFO.

— Increase taxes on investment fund managers, mainly hedge funds and private equity firms, raising about $21 billion. Investment managers typically pay capital gains taxes on their fees, with a top rate of 15 percent. Obama wants to tax the fees as regular income, with a top tax rate of 35 percent.

— Eliminate about $41 billion in tax breaks for oil and natural gas companies. Obama has called for eliminating tax breaks for all oil and gas companies every year since he took office in 2009. The biggest is a deduction for production expenses that is available to all manufacturers. In May, the Senate rejected a smaller proposal that targeted the five biggest companies: Shell Oil Co., ExxonMobil, ConocoPhillips, BP America and Chevron Corp.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Robinson: I'm not seeing much progress on deal

  1. Closed captioning of: Robinson: I'm not seeing much progress on deal

    >>> us now from washington , democratic congressman from maryland and the ranking member of the house oversight committee , elijah cummings . msnbc political analyst , eugene robinson . guys, good to have you. eugene , i want to read from your piece from "the washington post " in a moment. elijah, we are getting depressed here.

    >> don't get depressed.

    >> we are getting depressed.

    >> why is that?

    >> we can't find anything nice to say about either side in washington . it doesn't seem like anybody is maybe completely invested in getting something done. there are accusations on both sides of that. is that true?

    >> i think it's unfortunate that we are at what seems to be a stalemate. i think we have to put out political ads, take them off, leave them at the door and get the issue resolved. i just had a town hall meeting with elizabeth warren and i can tell you, my constituents are saying look, we are concerned about this debt ceiling, but you have to get this done. i think this is the time for us to sit in a room and resolve this matter. i'm glad the president is now engaged in this to a greater extend.

    >> congressman, everyone is saying we should get in a room. no one is on the other side of not being there. that's kind of the bottom line of yesterday's news. each side is accusing the other of not being there. this is silly.

    >> i have to tell you, we have to keep in mind that politics is the compromise. when we look at a budget situation and one side is giving and the other side just says no way, that we cannot, you know, on the one hand, the democrats are saying let's reduce spending and everybody agrees we ought to reduce spending and we got far along the way in doing that, then the republicans come back and say we are not going to deal with the other side. that is bringing in some type of revenue. that makes it difficult.

    >> we have two democrats from washington . senator brown saying the same thing about entitlement programs .

    >> i hate being in this position. i am convinced that this can be done. i am convinced that everybody in washington , i hope, understands how significant this debt ceiling situation is. so, i'm hoping that the leadership -- when you talk to them, to members that i talk to when they are not on the house, most people want to get a deal done. hopefully, our leaders will get together and get it done.

    >> congressman, you are talking to ran kin file members but are they republican members? the question i have for you is do you have confidence -- let's say they do get a deal and bring it to the floor of the house , does speaker boehner have the votes to actually get it passed?

    >> i talked to both republicans and democrats. there are some republicans in particular the newer ones who are mainly tea party type who, you know, are adamant they will not vote for such a deal. there are other ones around for awhile that say i'm hoping we are able to get a deal and move on. i have confidence. i have confidence in both sides. we gonna be able -- if they can hammer out a deal, we'll be able to get it through.

    >> eugene robinson , if you were writing a column right now on this conversation, what would your lead line be? just off the top of your head. you are at the typewriter.

    >> yeah.

    >> you are trying to pull it all together and really crystallize this conversation.

    >> prospects belief for a deal on debt ceiling because both sides are not yet ready. it seems to me for compromise. it's getting late in this. if republicans really will not give a centimeter on the revenue side, i think this is very difficult and potentially, we could go to august 2nd and the president has to decide whether or not to exercise a constitutional option to avoid a catastrophic default. i'm not seeing this progress that we all hope to see.

    >> congressman cummings, is there more you want from the president in terms of moving this process forward and getting to a result where both sides give something at the table?

    >> i want the president to do what he did the other day. some complained he was hard on congress. i think he has to do what he said he would do. the president said i will not tell you what you want to hear, i will tell you what you need to hear. he continues to move it around the country and do what he needs to do to make sure the american people understand how urgent this situation is. i thought he made a good case the other day with regard to the tax cuts for the rich at the expense of medicare and programs of that nature as we know them. so, yes, i want the president to continue to do what he's doing. i understand some feelings may be hurt. we have to get past that. it's that urgent. he's at a point now, as eugene said, we are reaching a deadline point. if we don't deal with it now, we are going to see results that are not very pleasing to anybody. i think our constituents will make it pay for it dearly.

    >> congressman, the president yelled at congress for not being in washington or not being here to get a deal done. then he jets off to philadelphia for a fund-raiser and republicans smack him around for not being there. is that a fair criticism?

    >> i don't think so. what the president -- as he said, he's dealing with issues every day and constantly. i think, again, it's not so much a question of being here, it's what we do when we are here. i think that, again, going back to what eugene said, if we cannot get the other side to compromise closing the loopholes, it's going to be a problem. i'm hoping that republicans will look at this and say you know what, this makes no sense. we have got to at least meet them one-third of the way, if not one-fourth and try to address this issue.

    >> eugene , we are going to get to your column next block. congressman, before you go, we looked at the cover of "time" magazine. you have legislation you are going to introduce with representative carolyn maloney , looking at weapons trafficking . tell us about it.

    >> we had a hearing yesterday where experts came in and basically told us that the guns that are fueling the drug wars in mexico , i'm talking tens of thousands of them coming from the united states and that there are two things they want. these are atf agents who begged us. they said look, you have to have stronger laws with regard to strong purchasers. they buy guns and sell them to mexican cartels. you have to have a drug trafficking law where this is illegal. right now, it is the guns coming from our nation. 80% of all guns involved in the cartels efforts in new mexico are coming from the united states . our legislation goes to those two issues to try to help the atf agents who asked for this kind of legislation trying to help them better control our situation in mexico .

    >> congressman eliza cummings, thank you.


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