Obama Says Tax Rate Cut for Wealthy Possible

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President Obama (R) meets with members of the bipartisan Governors Association Executive Committee, including Delaware Gov. Jack Markell (D)
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President Barack Obama said Tuesday that while tax rates must go up for a "fiscal cliff" deal, it may be possible to lower rates at the top end of the scale late next year as part of tax reforms that would close loopholes and limit deductions.

"Let's let those go up," Obama told Bloomberg Television in an interview, referring to tax rates for the wealthiest Americans.

"And then let's set up a process with a time certain, at the end of 2013 or the fall of 2013, where we work on tax reform, we look at what loopholes and deduction both Democrats and Republicans are willing to close, and it's possible that we may be able to lower rates by broadening the base at that point."

The remarks, which reiterated a position that White House officials have expressed privately, is designed to give Republicans an opportunity to lower rates for the rich, but only after they rise at year's end when Bush-era tax cuts expire.

Later, however, White House spokesman Jay Carney left open the possibility that the rate would not have to rise to 39.6 percent, the rate in place during the administration of President Bill Clinton.

The president made his comments a day after Republican House Speaker John Boehner released a counteroffer to Obama's initial proposal to avoid the end-of-year combination of half a trillion dollars in automatic tax hikes and spending cuts.

"We're going to have to have higher rates for the wealthiest," Obama told Bloomberg. "It's just a matter of math."

"We have the potential of getting a deal done," he added.

On Monday, Boehner called for steep spending cuts, but gave no ground on Obama's proposal to raise tax rates on the wealthiest Americans. (Read More: GOP 'Cliff'' Plan: Cut Medicare and Social Security.)

Boehner's plan elicited sharp criticism among conservative Republicans, potentially complicating what are expected to be intense negotiations between Boehner and Obama. Each will need the backing of their respective troops in Congress in order to bargain credibly.

The fiscal cliff refers to steep tax increases and deep automatic spending cuts slated to take effect on New Year's Day. If Congress and Obama do not act to stop them,the economy could be thrown back into recession.

The disagreements among Republicans surfaced as negotiations on a deficit reduction plan designed to supplant and avert the automatic cuts and tax hikes got more serious, with both parties having presented opening offers.

Sen. Jim DeMint, a South Carolinian with a following among small-government conservatives, lashed out Boehner's offer.

"Speaker Boehner's $800 billion tax hike will destroy American jobs and allow politicians in Washington to spend even more," DeMint said in a statement.

In the House, two first-term Republican Tea Party stalwarts — Tim Huelskamp of Kansas and Justin Amash of Michigan — were removed by party leadership from the powerful budget committee in what Huelskamp called "a vindictive move."

The Republican leadership offered no immediate explanation for the unusual action, but Boehner has had problems bringing in line the large Tea Party wing in the House. Elected to Congress in force in 2010, they regard the speaker as too much of a compromiser and tied his hands during talks in 2011 on raising the debt ceiling.

"The GOP leadership might think they have silenced conservatives, but removing me and others from key committees only confirms our conservative convictions," said Huelskamp.

Washington interest groups are now fully consumed by the cliff, and some are in a bit of a panic about what the talks might bring.

President Obama and Treasury Secretary Timothy F. Geithner (R) meet Tuesday with Governors Jack Markell of Delaware (L) and Mary Fallin of Oklahoma.
Brendan Smialowski | AFP | Getty Images

Tensions erupted on Tuesday at a forum convened by a fiscal responsibility group called Fix the Debt, which seeks to reduce the federal government's debt and includes a range of business, think tank and political leaders.

Audience members stood and repeatedly interrupted Republican Sen. Rob Portman of Ohio as he attempted to make a speech. They urged protections from cuts for the Social Security and Medicare social safety net programs.

Others shouted down the protesters until they marched out of the forum, where Democratic Senate Finance Committee Chairman Max Baucus also made remarks.

The central dispute between the two parties has been what to do about low individual income tax rates that will expire at year-end. The low rates were first signed into law a decade ago by former President George W. Bush.

Obama wants to extend the low rates for 98 percent of taxpayers, but not for the top 2 percent. Republicans have insisted that the low tax rates be extended for the wealthy as well.

The White House dismissed Boehner's proposal within an hour of its being made public, the same treatment Republicans gave Obama's deficit reduction plan offered last week.

Governors Meet With President Obama

While the offers and counter-offers between Republicans and Democrats may ultimately create the conditions for actually getting in a room together and bargaining at length, so far the moves have been out in public and mostly for show.

It's "just a Kabuki theater you go through" so far, Erskine Bowles said in an interview Monday evening on PBS' "Newshour." Bowles was co-chair with former U.S. Sen. Alan Simpson of a deficit reduction commission widely praised for its recommendations two years ago but never accepted by either party.

"They're going to have to get together at some point in time when the time is right in a conference room and go through these three big items," Bowles said.

Washington is awash in competing plans to cut the federal deficit. A think tank with ties to the Obama administration laid out another plan on Tuesday, urging the president to go bold and seek more concessions from Republicans on tax hikes.

Obama, meanwhile, met with six governors on Tuesday. The governors -- Democrats Jack Markell of Delaware, Mark Dayton of Minnesota and Mike Beebe of Arkansas and Republicans Gary Herbert of Utah, Scott Walker of Wisconsin and Mary Fallin of Oklahoma -- hold leadership positions in the National Governors Association.

"We asked for flexibility on how the federal money is passed down to the states and the cuts that are passed down, that we could have some flexibility to do what's in the best interest of our states," Fallin said.

They were to meet with GOP leaders later Tuesday.The Associated Press contributed to this story.