Paying for the budget includes tax increase on wealthiest Americans

Throughout the campaign, Obama said he was going to increase taxes on the wealthiest Americans. That made John McCain and the rest of the Republicans apoplectic. They thought the tax increase on the rich would surely result in an Obama loss. But, Obama won -- and he's following through on his campaign promise. The NYT's Robert Pear dissects the numbers:

President Obama will propose further tax increases on the affluent to help pay for his promise to make health care more accessible and affordable, calling for stricter limits on the benefits of itemized deductions taken by the wealthiest households, administration officials said Wednesday.

The tax proposal, coming after recent years in which wealth has become more concentrated at the top of the income scale, introduces a politically volatile edge to the Congressional debate over Mr. Obama’s domestic priorities.

The president will also propose, in the 10-year budget he is to release Thursday, to use revenues from the centerpiece of his environmental policy — a plan under which companies must buy permits to exceed pollution emission caps — to pay for an extension of a two-year tax credit that benefits low-wage and middle-income people.

The combined effect of the two revenue-raising proposals, on top of Mr. Obama’s existing plan to roll back the Bush-era income tax reductions on households with income exceeding $250,000 a year, would be a pronounced move to redistribute wealth by reimposing a larger share of the tax burden on corporations and the most affluent taxpayers.

Administration officials said Mr. Obama would propose to reduce the value of itemized tax deductions for everyone in the top income tax bracket, 35 percent, and many of those in the 33 percent bracket — roughly speaking, starting at $250,000 in annual income for a married couple.

Under existing law, the tax benefit of itemizing deductions rises with a taxpayer’s marginal tax bracket (the bracket that applies to the last dollar of income). For example, $10,000 in itemized deductions reduces tax liability by $3,500 for someone in the 35 percent bracket.

Mr. Obama would allow a saving of only $2,800 — as if the person were in the 28 percent bracket.

The White House says it is unfair for high-income people to get a bigger tax break than middle-income people for claiming the same deductions or making the same charitable contributions.

This will give the GOP a rallying cry: Protect the really rich. I mean, besides right wing whackos, they're the party of the rich -- the John McCain, Rush Limbaugh, George Bush and Dick Cheney kind of rich.

Obama is returning the tax code to where it was under Bill Clinton. That worked for the economy then. You can't really say Bush's tax policy did much for the economy. Most Americans were happy with their economic situation at the end of 2000. Not so true for the end of 2008.