WASHINGTON (Reuters) - Democratic presidential contender Barack Obama proposed up to $85 billion in tax cuts for about 150 million Americans on Tuesday, paid for by raising capital gains and dividend taxes on the wealthy.
Obama’s plan, announced in a speech in Washington, includes a tax cut of up to $500 per person to offset payroll taxes, a mortgage interest credit for low- and middle-income homeowners and the elimination of income taxes for seniors making less than $50,000 per year.
“I’ll restore simplicity to the tax code and fairness to the American middle class,” the Illinois senator said. “It’s time to stand up to special interest carve-outs.
“We need a tax code that’s fair — a tax code that rewards work and advances opportunity.”
Obama is playing catch-up in the 2008 race for the Democratic presidential nomination to Sen. Hillary Clinton of New York, who leads national polls less than four months before the first nominating contest in Iowa.
His focus on taxes comes as polls show growing public concern about the economy amid a housing slump and financial market turbulence. The U.S. Federal Reserve on Tuesday cut a benchmark federal interest rate by a half-percentage point to bolster the economy.
Obama said he would pay for the middle-class tax relief with a crackdown on corporate loopholes and offshore tax havens and by increasing taxes on capital gains and dividends. He also proposed eliminating the “carried interest” loophole, which would increase taxes on private equity fund managers.
He did not specify the size of the increases or the new rates, which aides said would depend in part on economic and revenue projections at the time the plan is implemented.
Some Democratic rivals said they would withhold judgment on the plan until they heard details of the new rates.
“When it comes to selecting a president, specifics matter, and we look forward to seeing what tax rates Senator Obama proposes,” said Eric Schultz, spokesman for Democratic contender John Edwards, a former North Carolina senator.
Obama said his proposal also would simplify the process of filing taxes so Americans could complete the process in less than five minutes.
“The tax code has become far too complex,” he said.
The plan would provide an income tax cut of $500 per person — or $1,000 per working family — to offset the payroll tax on the first $8,100 of earnings for 150 million Americans.
Because the cut would be greater than the income tax bill for some, he said, it would eliminate taxes for 10 million working Americans.
The homeowners’ tax credit would provide the average recipient with about $500 a year in tax savings, Obama said, benefiting about 10 million home owners.
He said the tax breaks for seniors would eliminate income taxes for about 7 million Americans, reducing each person’s taxes by an average of $1,400 a year.
“It’s time to give America’s seniors a break,” he said. “When I’m president, we’ll work to see that no retiree making less than $50,000 each year has to pay income tax.”
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