By Bernie Becker and Erik Wasson - 04/10/13 10:00 AM EDT
In all, the president’s budget calls for $580 billion in fresh revenues for deficit reduction, to be paired with the roughly $600 billion that the tax increases in the recent “fiscal cliff” deal will raise.
Meanwhile, the budget blueprint that Senate Democrats passed last month calls for some $975 billion in tax increases, from both the wealthiest taxpayers and large corporations, without specifying how the revenues would be raised.
“I would like to see us use the corporate tax reform to generate revenue for deficit reduction,” Senate Majority Whip Dick Durbin (D-Ill.) told reporters Tuesday.
“The president’s budget is important, and I’ll look at it carefully,” Durbin added. “But more important is the fact that we’ve passed a budget.”
Obama’s latest budget revives the rule, named for the investor Warren Buffett, that would mandate that households with incomes north of $1 million pay at least a 30 percent tax rate.
Under the proposal to limit tax deductions, the value of tax breaks like the mortgage interest deduction and the deduction for charitable contributions would be capped at 28 percent of a person’s taxable income – instead of the close to 40 percent that those deductions can be worth for the highest earners. Obama has included a similar proposal in each of his previous budgets.
The “Buffett Rule” and the deduction cap would combine for the $580 billion in deficit reduction laid out in the budget.
The administration had earlier said the budget would limit how much wealthy taxpayers – like Mitt Romney – can accumulate in individual retirement accounts, a proposal it now says would help pay for middle-class tax relief.
On the business side, the White House is reviving several planks included in its 2012 draft framework for corporate tax reform – including making permanent incentives for research and development and renewable energy, while ending tax breaks for the oil-and-gas industry.
That 2012 framework would have reduced the top corporate rate to 28 percent – from the current 35 percent – with manufacturers having the chance to drop down to 25 percent.
Obama has long shown more of an interest in reforming the corporate side of the tax code, but top Republicans – and even Senate Finance Chairman Max Baucus (D-Mont.) – have been pressing for a more comprehensive revamp.
"The goal is major overhaul," Baucus told reporters on Tuesday. "No fallback."
The previous corporate tax blueprint also called for paying to extend the research and development credit and other temporary incentives through tax reform, which Republicans charged amounted to a $250 billion tax increase.
“I think the framework is fine. Getting a bill is going to be much more difficult," Sen. Ben Cardin (D-Md.) said about early reports about the president's budget. "We all are interested in flattening the tax. But the problem is, what tax expenditures are you going to eliminate, or reduce? There doesn’t seem to be much agreement on that."
In the budget, the administration proposes letting small businesses to write off up to $500,000 in new investments, after last year’s corporate tax proposal called for $1 million in potential write-offs, and proposes ways to block corporations from shifting profits offshore.
Republican officials have called for a so-called territorial tax system, which would limit U.S. taxation of offshore income, while the administration has sounded more interested in setting a minimum worldwide tax for corporations. But Treasury Secretary Jack Lew, in his February confirmation hearing, said he thought there is “room to work together on this.”
The budget also puts forward a 10 percent tax credit for small businesses that add payroll, which is similar to an idea the president rolled out last year.