Obama says deficit plan must include higher taxes for wealthy

President Obama called on Congress on Friday to reduce the deficit in “a balanced and responsible way” in his first public remarks since winning reelection.

The president said Congress should extend the current tax rates for 98 percent of Americans, but raise taxes on households with annual income of more than $250,000.

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Obama did not talk about higher tax rates in his speech, but said he would not accept a deal that cut spending and entitlements but did not ask wealthier households to pay more taxes.

“If we’re serious about reducing the deficit, we have to combine spending cuts with revenue and that means asking the wealthiest Americans to pay a little more in taxes,” Obama said. “That’s how we did it in the 1990s when Bill Clinton was president, that’s how we can reduce the deficit while still making the investments we need to build a strong middle class and a strong economy.”

Obama invited lawmakers to the White House next week to begin discussing how to “build consensus on the challenges that we can only solve together.”

He also said he was pleased that Speaker John Boehner (R-Ohio) this week said additional tax revenue would be a part of a deficit-cutting deal.

"I was encouraged to hear Speaker Boehner agree that tax revenue has to be part of this equation, so I look forward to hearing his ideas when I see him next week," he said.

In a press conference that concluded about an hour before Obama spoke, Boehner said it was up to the president to lead on the "fiscal cliff" of spending cuts and tax hikes set to be implemented in January. 

“This is an opportunity for the president to lead,” Boehner said. “This is his moment to engage the Congress and work toward a solution that can pass both chambers.”

Neither Boehner nor Obama offered any details Friday on what higher taxes might be acceptable as part of a deal. 

Both have talked about raising tax revenue without raising rates, but it is unclear whether this would forbid higher tax rates on investment income such as capital gains and dividends, or on the estate tax. 

In both the substance of their comments and their tone, however, Obama and Boehner have suggested it is possible the two sides could reach a deal in the lame-duck session set to begin next week. 

Republican officials believe Obama and senior Democrats have left enough room to find a deal that meets the president's demand to force wealthy Americans to pay more in taxes while not increasing the top marginal income tax rates. 

In particular, they were encouraged by comments Friday morning by Sen. Charles Schumer (D-N.Y.), the third-ranking Senate Democrat, who said the party could accept a top marginal rate of 35 percent if tax deductions for the wealthy were reduced. Before the election, Schumer had ruled out tax reform that did not increase income rate for the top earners.

Bush-era individual tax rates as well as current tax rates on capital gains and dividends are set to expire at the end of the year. So are a host of tax credits and a payroll tax cut ushered in two years ago. The estate tax would also increase. 

Boehner repeated his longstanding opposition to increasing tax rates at Friday's press conference. But when asked to provide details, Boehner kept his cards close to his vest. 

“I would really rather not do that because I don’t want to limit the options that would be available to me or the options that might be available to the White House,” Boehner said in a press conference at the Capitol. “There are a lot of ways to get there, and I don’t want to preclude anyone who might have a good idea of how we move forward.”


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Boehner has called for tax reform that would involve lowering rates while eliminating tax deductions. He suggested this week that this could lead to higher tax revenue for the government, meaning at least some people or businesses would pay higher taxes.

Senate Majority Leader Harry Reid (D-Nev.) called on the House to immediately pass a Senate bill extending current tax rates for those with annual income below $250,000. 

"Our bill cuts taxes for small businesses. When Republicans talk about small businesses, they are really trying to protect millionaires like Donald Trump," Reid said. “It is time for us to put politics aside and give the American people the balanced approach they are demanding. I am optimistic that we can meet this challenge before the end of the year.”

Senate Minority Leader Mitch McConnell (R-Ky.) in a statement reiterated his opposition to any tax rate increases. 

“I was glad to hear the president’s focus on jobs and growth and his call for consensus," McConnell said. "But there is no consensus on raising tax rates, which would undermine the jobs and growth we all believe are important to our economy."

In a statement after Obama's remarks, Boehner didn't directly criticize the president but reiterated that the Senate-passed bill on middle class tax rates would "allow" tax increases that he said would "destroy jobs." The legislation does not address the upper-income rates, but Republicans have long opposed decoupling the income brackets under the assumption they would lose all leverage on the top rates if they locked in tax cuts for the middle class separately.

The Speaker is likely to come under pressure from members of his conference not to give in on any tax hikes. Lawmakers return to Washington next week to begin a lame-duck session. 


On Friday, however, Boehner received a statement of support Friday from Rep. Jim Jordan (R-Ohio), the outgoing chairman of the conservative Republican Study Committee. 

"Speaker Boehner is absolutely right. It’s time for President Obama to show he can lead," Jordan said. He called on Obama to submit a specific proposal in the form of legislation to Congress. As leader of the large bloc of conservatives, Jordan has frequently opposed deals Boehner has struck with the White House

Obama said Americans voted “for action and not politics as usual” and he vowed to work with both parties to achieve that goal.


“At a time when our economy is still recovering from the great recession, our top priority has to be jobs and growth,” Obama said in the East Room of the White House. “That’s the focus of the plan that I talked about during the campaign.”

While he reiterated his intention to work with members of both parties, Obama said, “we can’t just cut our way to prosperity.”

He did not talk about having a mandate, but said Tuesday’s election results show the “majority of Americans agree with my approach.”

Obama highlighted his own plan to reduce the deficit, but said he was willing to negotiate, saying he is not “wedded to every detail” of his plan.

“I’m open to compromise,” he said. “I’m open to new ideas. I’m committed to solving our fiscal challenges. But I refuse to except any approach that isn’t balanced.”

But Obama warned that if Congress fails to come to an agreement on an overall deficit package by the end of the year, everybody's taxes would automatically go up at the start of the new year.

"And that makes no sense," he said. "It would be bad for the economy and would hit families that are already struggling to make ends meet ... We shouldn't need long negotiations and drama to solve that part of the problem."

This story was posted at 1:39 and updated at 3:51 p.m.