Obama calls for $1.6 trillion in taxes
Both sides want ot avert fiscal cliff, but none willing to sacrifice too much.
Get ready to pay. President Obama has proposed $1.6 trillion in new taxes, falling mostly on the wealthy and small businesses. The taxes are part of a $4 trillion deficit reduction plan. Most of the revenues will come from households earning in excess of $200,000 and $250,000 if married.
Investment taxes on the rich would also increase to 20 percent for capital gains and at the top marginal rate for dividends. Currently, the tax on dividends is 15 percent.
These increases would generate over a trillion dollars in new revenues for the government.
Obama has also suggested limiting the exclusions that high-income households could take, which would generate another 500 billion.
There are a variety of other smaller tax hikes which could apply more broadly and generate tens of billions of dollars over the next decade.
The overall plan is unchanged from a proposal the president made in February for the 2013 budget.
Obama is scheduled to sit down with congressional leaders on Friday to begin work on averting the looming "fiscal cliff" that now presents a significant risk to the economy. The fiscal cliff is the blend of tax hikes and cuts that will bring federal spending down, and revenues up, but may also harm the economy.
Economists widely expect a recession for the first quarter of 2013 should the country go over the fiscal cliff on January 1.
Both sides want to avoid the fiscal cliff and ensuing recession, especially because recessions are expensive. During a recession, the government must sustain larger populations of unemployed people and food aid recipients.
Despite the urgency however, Republicans have vowed to resists the $1.6 trillion tax hikes. Meanwhile, Democrats are wary of deep cuts to social services that many still rely upon to make ends meet.
Both sides have signaled a willingness to compromise, but it is unlikely either will be satisfied with the outcome.
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