Sen. Olympia Snowe (Maine), one of President Obama's most important Republican allies, is skeptical about his plan to raise a variety of taxes to reduce the budget deficit.Obama's advisers have told lawmakers that they would like to fund a $634 billion healthcare proposal over the next 10 years by scaling back tax deductions for the nation's highest income earners.
"Maybe he's got the cart before the horse," Snowe said of Obama's proposed tax increases.
Specifically, Obama would like to reduce how much earners in the top bracket, who pay 35 percent income tax, may deduct. The president would like to limit the deductions of top-bracket earners to the same level as Americans in the 28 percent bracket.
Under this plan, top earners would no longer accrue $3,500 in tax savings for every $10,000 deducted. The benefit would be limited to $2,800 -- the percentage of benefit available to taxpayers further down the income scale.
Snowe has concerns that Obama's new plan will only add to the complexity of the tax code.
She believes Congress should tackle the bigger job of restructuring the entire tax code in a simpler way. "I would prefer tax reform," Snowe said Thursday after Obama's budget hit the Hill. "I don't know why we can't do it. I don't know why they can't set up a working group, a collaborative process between Treasury and Congress, House Ways and Means and Senate Finance and start that process because we have a serious problem with the tax code."
Snowe said she told Obama that she would like tax reform pursued during the 111th Congress.
The centrist Republican said now is the time to act because Congress will have to soon deal with the expiration of income tax cuts passed during former President Bush's first term and the expiration of a one-year freeze of the Alternative Minimum Tax. "I'm saying we should have tax reform in the next two years, just like we did in '84. We had two years of a lot of debate and a lot of contentiousness but worked it through between Treasury, House and Senate."
Snowe was the only Republican on the Senate Finance Committee to vote for the Democratic-crafted tax portion of the $787 billion economic stimulus package. Obama's Make Work Pay tax credit, which provided tax relief up to $400 for individuals and $800 for couples, was the centerpiece of that proposal.
Snowe was one of only three Republicans to vote for the entire stimulus package, the first major priority of Obama's first term. Centrist GOP Sens. Susan Collins (Maine) and Arlen Specter (Pa.) also voted for it.