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Obama plans $1.5 trillion tax raise to cut deficit

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President Barack Obama

President Barack Obama is to unveil plans to cut the US deficit by $3 trillion (£1.9tn) over the next decade.

A White House official said his proposals include an overhaul of the tax code that would raise $1.5tn.

The official said the president would not agree to cuts in health care for the elderly if there were no provisions for rich Americans to pay more tax.

Republicans in Congress have already said they will not agree to any plans to increase taxes.

Mr Obama’s plans include nearly $250bn in cuts on Medicare spending – the health care programme for the elderly.

“He will veto any bill that takes one dime from the Medicare benefits seniors rely on without asking the wealthiest Americans and biggest corporations to pay their fair share,” Reuters quoted an Obama administration official as saying.

The president is scheduled to announce his long-term deficit reduction plan at the White House at 10:30 (14:30 GMT) on Monday.

Closing loopholes

Over the weekend, officials have been providing journalists with a preview of what the president’s plan includes.

On Saturday, officials said Mr Obama wanted a “Buffett Rule” that would see Americans who earn more than $1m pay the same rate of tax as those who earn less.

The proposal refers to the billionaire financier Warren Buffett who has complained that he and his wealthy peers pay relatively less tax than the people who work for them.

Many high-income Americans benefit from tax loopholes that see earnings on investment taxed at lower rates than wages.

The US economy has been growing only slowly while the unemployment rate remains stubbornly high, above 9%. Facing an election next year, Mr Obama has had a battle in Congress over how to reduce the ballooning deficit while the economy remains stagnant.

A Congressional “supercommittee” of six Republicans and six Democrats has been charged with finding $1.5trn in deficit cuts by late November, when automatic cuts come into force.

Ratings agency Standard and Poor’s cut the US AAA rating in August after the country went to the brink of a default over an extended battle in Congress over raising the government’s debt limit.

Source: BBC

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