Obama: more tax revenue needed to address deficit - CBS

WASHINGTON Sun Feb 3, 2013 7:44pm EST

U.S. President Barack Obama addresses a news conference at the White House in Washington, January 14, 2013. REUTERS/Jonathan Ernst

U.S. President Barack Obama addresses a news conference at the White House in Washington, January 14, 2013.

Credit: Reuters/Jonathan Ernst

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WASHINGTON (Reuters) - President Barack Obama said on Sunday more tax revenue would be needed to reduce the U.S. deficit and signaled he would push hard to get rid of loopholes such as the "carried interest" tax break enjoyed by private equity and hedge fund managers.

Obama, who won re-election in November largely on his promise to raise rates for the wealthiest Americans, pushed through a legislative package at the beginning of the year that raised rates for individuals making more than $400,000 a year and households making more than $450,000 a year.

In an interview with CBS, Obama said the United States could reduce the deficit and invest in education without raising rates again if it enacted "smart spending cuts" that trimmed government waste, reformed expensive healthcare programs, and closed lucrative loopholes.

"I don't think the issue right now is raising rates," Obama said in the interview, broadcast live before the Super Bowl football game.

"There is no doubt we need additional revenue, coupled with smart spending reductions in order to bring down our deficit. And we can do it in a gradual way so that it doesn't have a huge impact," he said.

Obama indicated he would seek to end deductions that are not available to all Americans, singling out "carried interest," which refers to the tax rate paid by many private equity managers, venture capital and real estate partnerships.

Obama and many Democrats have repeatedly criticized the tax break as unfair and called for carried interest to be taxed as ordinary income. The tax break was the key reason for the low tax rate paid by Obama's 2012 Republican presidential challenger, former Massachusetts governor and private equity executive Mitt Romney.

"We just want to make sure that the whole system is fair, that it's transparent, and that we're reducing our deficit in a way that doesn't hamper growth," Obama said.

CARRIED INTEREST, STRONG GROWTH

Individuals who benefit from carried interest took a hit in the year-end budget deal that averted the "fiscal cliff" set of spending cuts and tax increases.

For incomes above $400,000 per individual, or $450,000 per family, capital gains and dividend taxes were increased to 20 percent from 15 percent.

"Given the 58 percent increase in taxes paid on capital gains as part of the recent deal to avert the fiscal cliff, it is our hope that any tax reform effort in 2013 will be about crafting policies that incentivize economic growth," said Steve Judge, president and chief executive of Private Equity Growth Capital Council, responding to Obama's comments.

The budget law permanently extended ordinary tax cuts for incomes below $400,000 per individual, or $450,000 per family. Income above that level is now taxed at 39.6 percent, up from 35 percent.

Asked about the unexpected contraction of the U.S. economy in the fourth quarter, Obama said a dramatic cut in defense spending because of fears about the "fiscal cliff" had overshadowed strong manufacturing and a rebounding housing market.

He blamed dysfunction in Washington for the hit.

"Washington cannot continually operate under a cloud of crisis. That freezes up consumers. It gets businesses worried," Obama said.

"There is a way for us to solve these budget problems in a responsible way through a balanced approach that the vast majority of people agree with. If we do that, there's no reason why we can't have really strong growth in 2013."

(additional reporting by Patrick Temple-West, Alina Selyukh and Greg Roumeliotis)

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Comments (21)
astroz wrote:
Clearly, the game here is to threaten to totally destroy this nation with debt to fund unlimited spending unless Uncle Sam can pick our pockets even further. They finally got their tax increases on the rich…whose next? Where does this end?

Feb 03, 2013 10:18pm EST  --  Report as abuse
fedupaj wrote:
Has this idiot ever considered cutting spending. We no longer can stand Obama’s big spending ways and now he wants more. I guess it will end when we are all broke and are Obama’s slaves.

Feb 03, 2013 11:13pm EST  --  Report as abuse
xyz2055 wrote:
No one in this country is paying anywhere even close to the top individual tax rate of 39.6% except lottery winners. Capital Gains and Dividend taxes went to 20% from 15%. 47% (with some millionaires included in that group) paid zero federal taxes last year. Some families that adapted tons of kids got refunds in excess of $50,000 while they paid no where near that much to begin with. Apple has a 7% functional tax rate and GE (while making billions in profit) paid zero in federal taxes in 2010 and 2011. Then you have Wall Street brokers and Hedge Fund Managers who have all of their earnings classified as either capital gains or carried interest…taxed way below individual tax rates. The PURPOSE of taxes is to fund the spending bills that Congress has approved and other government expenses. With the current deficits you either have to raise taxes (get rid of some of the ridiculous loopholes), cut spending or a combination of the two.

Feb 03, 2013 11:17pm EST  --  Report as abuse
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