White House Rethinks Tax Hikes
WASHINGTON, March 5, 2009, The Wall Street Journal — President Barack Obama is meeting strong Democratic Party resistance to his proposal to reduce tax deductions enjoyed by upper-income Americans and could be forced to drop or modify the idea.
Mr. Obama in his budget blueprint last week proposed a cap on itemized deductions for mortgage interest and charitable donations to help pay for his health-care overhaul. The plan would cost wealthier taxpayers about $318 billion in new taxes over 10 years, according to government estimates.
But after objections from Democratic lawmakers, Treasury Secretary Timothy Geithner appeared to suggest at one point Wednesday that the administration was willing to consider dropping or modifying the proposal.
The resistance from Mr. Obama’s own party — focusing on a single element of the president’s tax plans — could foreshadow broader troubles for the rest of his proposed tax increases.
Republicans have already taken aim at rate increases planned for higher-income earners, as well as the administration’s plans to raise hundreds of billions of dollars through climate-change legislation.
During two days of congressional hearings on the Obama budget blueprint this week, Democrats added their own concerns.
Sen. Max Baucus (D., Mont.), the Senate’s top tax writer as chairman of the Finance Committee, told Mr. Geithner he was especially concerned about paying for expanded health coverage with a deductions curb that “has nothing to do with health care.” He added: “I’m wondering about the viability of that provision.”
“We recognize there are other ways to do this,” Mr. Geithner responded during a hearing Wednesday. “We are willing to listen to all ideas that meet these broad principles.”
Some lawmakers questioned whether it was smart to reduce mortgage-interest deductions in the midst of a housing-market crisis.
“Isn’t there a concern that limiting the deduction would further depress home prices?” Sen. Pat Roberts (R., Kan.) asked during the hearing.