UPDATE 2-Obama vows to reform "monstrous" U.S. tax code

Wed Apr 15, 2009 7:19pm EDT

Related Topics

* Obama emphasizes delivery of tax cuts

* Says time to take on byzantine U.S. tax code

* Critics attack government's "wasteful spending" (Adds Obama's tax return, additional protest)

By Matt Spetalnick

WASHINGTON, April 15 (Reuters) - President Barack Obama promised Americans his administration would reform the "monstrous" U.S. tax system as millions faced the dreaded annual deadline on Wednesday for filing income tax returns.

Obama used Tax Day, a national ritual of public frustration due to the confusing tax code, to underscore his drive to cut taxes for many Americans while increasing spending to jolt the United States out of its worst recession in decades.

Opposition Republicans seized the chance to rail against what they see as wasteful spending by his new Democratic administration, and some of Obama's grass-roots critics staged "tea party" protests in several U.S. cities.

Obama is pushing a $3.5 trillion federal budget plan that Republicans and some Democrats say carries too much deficit spending and too few tax cuts.

"My administration has taken far-reaching action to give tax cuts to the Americans who need them, while jump-starting growth and job creation in the process," Obama said at a White House event with a group of workers and business owners.

White House spokesman Robert Gibbs said Obama had already cut taxes for 95 percent of Americans and would stick to his pledge of no higher taxes for anyone earning less than $250,000 a year.

"We know that tax relief must be joined with fiscal discipline," Obama said. He also reiterated a pledge to stop giving tax breaks to companies that "ship jobs overseas."

Obama and his wife Michelle jointly filed a 2008 federal income tax return reporting an adjusted gross income of $2,656,902 and paying $855,323 in federal income tax and $77,883 in state income taxes, according to tax information released by the White House.

TEA PARTY PROTESTS

As a counterpoint to Obama's defense of his policies, protests were held in Washington, Chicago, Boston and other cities. Organizers said the protests were inspired by the 1773 Boston Tea Party rebellion against British colonial taxes, which helped spark the American revolution.

The "tea party" protesters demonstrated against taxes, government bailouts and Obama's budget proposal.

Rallies were planned at state legislatures across the South, the most conservative region of the United States. In Mississippi, around 2,000 people gathered on the steps of the state capitol in Jackson.

"Our biggest thing is to protest the overspending of our government. They are not looking at the people. They are just automatically dipping into our pockets," said Julia Hodges, an organizer of the Tax Day Tea Party in Mississippi.

Several hundred people, some in 18th century garb, braved chilly rainy weather in Lafayette Park, across the street from the White House, where they chanted "Don't tread on me!"

Since taking office on Jan. 20, Obama has promised sweeping reform of the tax code. Former Federal Reserve Chairman Paul Volcker is leading a panel that is to study options and report back by the end of the year.

Seeking to tap into public exasperation, Obama said: "We need to simplify a monstrous tax code that is far too complicated for most Americans to understand."

"It will take time to undo the damage of years of carve-outs and loopholes. But I want every American to know that we will rewrite the tax code so that it puts your interests over any special interest. And we will make it quicker, easier and less expensive for you to file a return, so that April 15 is not a date that is approached with dread each year," he said. (Additional reporting by Andy Sullivan in Washington, Scott Malone in Boston and Kathleen Baydala in Jackson, Mississippi; editing by Mohammad Zargham)

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