Obama to propose $3T in cuts, threaten to veto tax cuts for wealthy

President Obama on Monday will unveil a $3 trillion deficit-reduction and tax reform plan while promising to veto any package tackling debt that changes entitlement but doesn't raise taxes on the wealthy and corporations.

Administration officials said the proposal Obama will announce at a Rose Garden event on Monday will pay for Obama's $447 billion jobs plan while cutting $3 trillion in deficit spending over 10 years.

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The $3 trillion in deficit reduction is made up of money saved from ending the war in Iraq and drawing troops down in Afghanistan, raising taxes for the wealthy and corporations and cutting about $320 billion in Medicare and Medicaid, administration officials said Sunday night.

The proposals represent the president's vision for the path he thinks the supercommittee should take; not the elements of compromise Obama sought with House Speaker John Boehner in a "grand bargain" in July. The proposal is also meant to set the president's terms for a debate about the economy and how the nation's finances should be paid for that will extend through his reelection bid next fall.

Of the mandatory program cuts, Obama will propose $248 billion in cuts and reforms to Medicare -- 90 percent of which would come from reducing overpayments -- and $72 billion in Medicaid and other healthcare programs, all over 10 years.

A senior administration official said that "there will be both provider and beneficiary policy changes," but declined to say what cuts those would include.

There is no proposed raise the Medicare age, administration officials said, because the plan is the president's vision and not an effort to win votes in the House and Senate as was the case in July.

But Obama will explicitly threaten to veto any bill that Republicans send to him that cuts Medicare but does not raise taxes on the wealthy, administration officials stressed.

Boehner said in a speech last week that revenues should be off the table for the committee, and Republicans have repeatedly drawn a line at agreeing to any tax hikes.

Administration officials said Obama will also propose tax reform to lower tax rates, while cut loopholes and tax breaks for the wealthy and corporations. The tax reform proposals will raise revenue through increased taxes on the wealthy, reducing the deficit by $1.5 trillion, the officials said. 

Obama wants the tax code to be "consistent with the Buffett rule," which states that the middle class should not pay a higher rate of taxes proportionate to their incomes than millionaires and billionaires like Warren Buffett, who has said he pays a lower tax rate than his secretary.

To that end, administration officials said that tax reform and the estimated $800 billion that would be saved from rolling back the Bush tax cuts "would be sufficient to hit the $1.5 trillion target that we're setting."

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The rest of the tax savings would come from closing $300 billion worth of loopholes and ending about $400 billion in deductions for the wealthy, he officials said.

Another $1 trillion in savings would come from ending the war in Iraq and the drawdown and transition in Afghanistan, officials said.

The total deficit reduction, including the $1 trillion that was cut as a result of the debt ceiling compromise, would be $4 trillion over 10 years.

Over the weekend, Republicans were quick to note that most of the tax reform proposals are not new from Obama, and at least twice, legislative efforts to implement them were defeated.