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Friday 22 August 2014

Obama softens tax-the-rich demand

Published 18/12/2012 | 02:59

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Barack Obama is in talks with Republican rivals on avoiding a 'fiscal cliff' (AP/Jacquelyn Martin)

Barack Obama has softened his demand for higher taxes for top earners and agreed to curtail future inflation adjustments for those on Social Security pensions to speed up talks with Republican rivals on avoiding a "fiscal cliff".

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Officials familiar with the talks said the manoeuvring was aimed at reaching an agreement to rein in deficit spending before an automatic year-end increase in taxes for nearly all wage-earners strikes, as well as deep spending cuts in defence and domestic programmes across the US government.

Economists have warned that the combination of the two, set to begin at the end of the year, could send the economy into recession.

Speaking a few hours after Mr Obama and House of Representatives speaker John Boehner met at the White House on Monday night, sources said the President was now seeking higher tax rates beginning at incomes over 400,000 dollars (£247,000) for couples, down from the 250,000-dollar (£154,300) level that was a cornerstone of his successful campaign for re-election.

Mr Obama's willingness to reduce future cost-of-living increases in Social Security pensions and numerous other government programmes marked a clear concession to Mr Boehner, although it came with an asterisk - the President wants lower-income recipients to be exempt from any loss from scaling back future pension cost-of-living increases, the sources said.

Nor did Mr Obama's offer include raising the age of Medicare eligibility from 65 to 67, a Republican goal that has drawn particularly strong objections from Democratic liberals who cherish the federal health care programme for the elderly.

Several officials also said during the day that Mr Boehner's offer late last week to accept higher tax rates - a first in the talks - included provisions that would mean higher taxes on investment income and dividends earned by wealthy Americans.

Other major issues are part of the negotiations. Without action by Congress, for example, long-term unemployment benefits will expire for millions at the end of the year and doctors will face a cut in the payments they receive for treating Medicare patients.

Mr Obama has also called for assistance for hard-pressed homeowners as well as fresh economic stimulus measures, and some Democrats want to include a sizeable amount of disaster aid in any legislation to offset the cost of Superstorm Sandy. His latest offer included another concession, dropping his earlier proposal to extend a payroll tax cut due to expire at the year's end.

At the White House, spokesman Jay Carney sidestepped when asked about curbing cost-of-living increases for benefit programmes. The president "is prepared to make tough choices. He also understands that his bill will not, as written, likely be what the final compromise, if there is one, looks like", he said. "But he insists and will insist before he signed anything that there is the balance that he seeks that is fair and that seniors aren't bearing the burden so that the wealthy bear less - those who can afford it most bear less."

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