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C.E.O Denies That Apple Is Avoiding Taxes

May 21, 2013 by Leave a Comment

“It’s important to tell our story, and I’d like people to hear directly from me,” Mr. Cook told a Senate panel during questioning by Senator John McCain, an Arizona Republican. Apple, he said, pays “all the taxes we owe — every single dollar.”

Rather than taking unfair advantage of what Congressional investigators say are a host of tax code loopholes, Mr. Cook said his company was actually a victim of an outdated tax system.

“Unfortunately, the tax code has not kept up with the digital age,” Mr. Cook said. “The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free movement of capital.”

On Monday, Congressional investigators unveiled a detailed report showing how Apple subsidiaries based in Ireland but spanning other regions had helped the company pay as little as one-twentieth of 1 percent in taxes on billions of dollars in income.

Mr. Cook sought to draw a sharp distinction between sales in the United States and those abroad, arguing the company had complied with local laws everywhere.

“The way I look at this is that Apple pays 30.5 percent of its profits in taxes in the United States,” he said. “We do have a low tax rate outside the U.S., but this is for products we sell outside the U.S.”

Again and again, Mr. Cook said Apple was proud to be an American company, even if the majority of its sales took place outside the United States and were taxed at lower rates. “We are an American company, whether we are selling in China or Egypt or Saudi Arabia.”

Before Mr. Cook and two other top Apple executives testified, however, other witnesses suggested Apple had pushed to take advantage of the tax code.

J. Richard Harvey Jr., a professor at Villanova Law School, estimated that Apple’s legal maneuvering had saved the company $7.7 billion in potential American taxes in 2011.

“Apple is an iconic U.S. multinational corporation that has enjoyed extraordinary financial success,” he said. “In addition to demonstrating excellence in designing, building and selling consumer products, Apple has been very successful at minimizing its global income tax burden.”

For example, in 2011, 64 percent of Apple’s global pretax income was recorded in Ireland, where only 4 percent of its employees and 1 percent of its customers were located, Mr. Harvey said.

While Apple has repeatedly insisted it does not engage in “tax gimmicks,” Mr. Harvey was dubious. “Apple does not use tax gimmicks? I about fell off my chair when I read that,” he said.

While Mr. McCain, the panel’s top Republican, and Senator Carl Levin, a Democrat, were critical of Apple, the company was not without its defenders on the panel.

“I’m offended by the spectacle of dragging in Apple executives,” said Senator Rand Paul, a Kentucky Republican. “What we need to do is apologize to Apple and compliment them for the job creation they’re doing.”

Instead of “bullying” Apple executives, Mr. Paul said, “we should have brought in a giant mirror to look at the reflection of Congress. If you want to assign blame, look in the mirror and see who created this mess.

“Apple hasn’t broken any laws, yet Apple is forced to sit through a show trial,” he said.

Mr. Paul’s comments drew a sharp response from Mr. Levin.

“Apple is a great company,” Mr. Levin said. “But they don’t have a right to decide in my book how much in taxes they are going to pay and to whom they are going to pay them.”

Article source: http://www.nytimes.com/2013/05/22/technology/ceo-denies-that-apple-is-avoiding-taxes.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

E.U. Members at Odds on Banking Regulation and Greece

November 13, 2012 by Leave a Comment

Also Monday, the finance ministers postponed at least until Nov. 20 a decision on releasing a long-delayed installment of €31.5 billion in aid to Greece. The country’s finance minister warned that without the aid, the country’s risk of defaulting on its debt remained high.

A plan to establish a single banking supervisor under the aegis of the European Central Bank for the 6,000 lenders in the euro area dominated a second day of talks here. The meeting Monday concentrated on the plight of Greece, which still threatens to derail the euro zone after dragging on for more than two years.

The new banking supervisor is seen as a major step toward breaking the so-called doom loop in which frail banks can endanger national finances and push countries toward full bailouts.

Germany made the creation of the single supervisor a prerequisite for states to tap a newly created European bailout fund and use the money to recapitalize their banks directly.

But Luc Freiden, the finance minister of Luxembourg, said Tuesday that the system still could be months away.

“We shouldn’t be fixed to dates,” Mr. Freiden said. “If it takes three months longer, it’s no problem.”

Maria Fekter, the Austrian finance minister, asked whether the creation of the new regulator would require changes to the E.U. treaty, or “would be the better solution” in creating a banking union. “Speed kills when we don’t have the best solution,” she told ministers.

The European Commission has said a unified system of regulation could be up and running next year. Germany is among the countries that have urged caution, saying that rushing the process would risk creating new loopholes. Britain and Sweden say much work still needs to be done to ensure the system does not discriminate against E.U. countries outside of the euro area.

“We cannot see a compromise with only the current modalities on the table,” Anders Borg, the Swedish finance minister, said Tuesday. “The E.C.B. could be the supervisor but then we need to consider a treaty change. Either you must change the treaty so it’s clear that every member is treated equitably, or you need to move it outside of the E.C.B.”

Finance ministers also discussed creating a “Robin Hood tax” — a fee levied on equity trades.

Britain and Sweden are among the countries that have said they would not participate in such a tax, but 11 of the 27 E.U. countries have expressed interest in going forward with the plan. On Tuesday, Wolfgang Schäuble, the German finance minister, said plans for the tax “will gather momentum.”

In a sign that repairing the Greek economy and the euro would continue to be a rancorous process even after years of crisis, Jean-Claude Juncker, the prime minister of Luxembourg, and Christine Lagarde, the managing director of the International Monetary Fund, drew strikingly different conclusions late Monday about how long it should take to bring the towering Greek debt under control.

The disagreement is a hugely sensitive matter for Greece’s biggest creditors in the euro area and for Germany in particular. The government in Berlin wants to avoid the political fallout from the higher costs that would result from meeting the I.M.F.’s target for cutting Greek debt to 120 percent of gross domestic product by 2020. The debt is now estimated at 175 percent of G.D.P.

Mr. Schäuble said that meeting the I.M.F. target was “possibly a little too ambitious” given worsening economic conditions across Europe.

He also said that Greece’s creditors would find ways to help the country meet the higher costs resulting from giving it more time to meet fiscal goals now set for 2016, other than handing over more money.

“There are no considerations to top up the program,” Mr. Schäuble said. “In the end it will be all about guarantees, not transfer for Greece.”

Creditors could agree instead to “take some measures to reduce interest rates that will have an immediate effect” on the Greek budget, he said.

A draft copy of a report by the troika of international lenders — the European Commission, the European Central Bank and the International Monetary Fund — that was circulating at the meeting said the bill for allowing Greece more time would be €32.6 billion, or $41 billion.

Helping Greece through 2014 would require €15 billion, partly to make up for lower-than-expected proceeds from privatizations, according to the draft report.

An additional €17.6 billion would be needed for 2015-16 because Greece was expected to be servicing more debt than previously forecast and because the country may be unable to tap capital markets, the draft report said.

Late Monday, ministers put off a decision on releasing a €31.5 billion installment of aid to Greece until officials could assess the country’s progress in implementing measures Athens agreed to take as a condition for receiving two bailout packages totaling €240 billion.

Yannis Stournaras, the Greek finance minister, said that without the funding the country was still perilously close to defaulting on its debt.

“The risk of an accident is very great,” Mr. Stournaras told the European Parliament’s economic and social affairs committee. “Time is running out, society is exhausted.”

Even after euro zone finance ministers approve the aid, it still must be cleared by a number of national parliaments.

Niki Kitsantonis contributed reporting from Athens.

Article source: http://www.nytimes.com/2012/11/14/business/global/disagreement-over-banking-regulation-marks-second-day-of-eu-talks.html?partner=rss&emc=rss

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Disagreement Over Banking Regulation Marks Second Day of E.U. Talks

November 13, 2012 by Leave a Comment

A plan to establish a single banking supervisor under the aegis of the European Central Bank to oversee the 6,000 lenders in the euro area was on the agenda for a second day of talks that had concentrated Monday on the Greek situation, which still threatens to derail the euro zone after dragging on for more than two years.

The creation of the single banking supervisor is seen as a key step to breaking the so-called doom loop between lenders and governments that has brought a number of economies in Europe, including Spain’s, to the brink.

Germany made the creation of the single supervisor a prerequisite for states to tap a newly created European bailout fund and use the money to bailout their banks directly.

But Luc Freiden, the finance minister for Luxembourg, said on Tuesday that the system still could be months away.

“We shouldn’t be fixed to dates,” said Mr. Freiden. “If it takes three months longer, it’s no problem.”

The European Commission has said a unified system of regulation could be up and running in the new year.

Germany is among countries that have urged caution, saying that rushing the system would risk creating new loopholes. Britain and Sweden say much work still needs to be done to ensure the new system does not discriminate against countries that remain outside of the euro area.

“We cannot see a compromise with only the current modalities on the table,” Anders Borg, the Swedish finance minister, said on Tuesday morning. “The E.C.B. could be the supervisor but then we need to consider a treaty change,” he said. “Either you must change the treaty so it’s clear that every member is treated equitably, or you need to move it outside of the E.C.B.”

Finance ministers were also expected to discuss increasing capital requirements for banks and how to more closely monitor the draft budgets of E.U. members and correct excessive deficits.

In a sign that fixing the Greek economy and the euro would continue to be a rancorous process even after three years of continuous crisis, Jean-Claude Juncker, the prime minister of Luxembourg, and Christine Lagarde, the managing director of the International Monetary Fund, drew strikingly different conclusions late on Monday about how long it should take to bring the towering Greek debt under control.

The disagreement is a hugely sensitive matter for Greece’s biggest creditors in the euro area and for Germany in particular. The government in Berlin wants to avoid the political fallout from paying higher costs associated with meeting a target set by the I.M.F. for cutting Greek debt to 120 percent of gross domestic product by 2020.

Wolfgang Schäuble, the German finance minister, told a news conference on Tuesday morning that meeting the I.M.F. target was “possibly a little too ambitious” given the worsening economy across Europe.

Mr. Schäuble also said Greek creditors would be able to find ways to help the country meet the higher costs of delaying some of its previously agreed targets to 2016, without handing over more money.

“There are no considerations to top up the program,” said Mr. Schäuble, referring to giving additional support for Greece. “In the end it will be all about guarantees, not transfer for Greece.”

Creditors could agree instead to “take some measures to reduce interest rates that will have an immediate effect on the budget” in Greece to ensure that “problems will be solved within the financial framework of the second program,” Mr. Schäuble said.

A draft copy of a report by the troika of international lenders — the European Commission, the European Central Bank and the International Monetary Fund — that was circulating at the meeting said the bill for allowing Greece the additional time would be €32.6 billion.

Helping Greece through 2014 would require €15 billion partly to make up for lower than expected proceeds from privatizations, according to the draft report.

Article source: http://www.nytimes.com/2012/11/14/business/global/disagreement-over-banking-regulation-marks-second-day-of-eu-talks.html?partner=rss&emc=rss

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Economix Blog: What Do Democrats and Republicans Agree On?

August 29, 2012 by Leave a Comment

Karen Bleier/Agence France-Presse — Getty Images

In the next two weeks, during the Republican and Democratic conventions, we’ll hear a lot about the differences between the parties. How great we are. How terrible the other guy is. How we’re better on Medicare, on Social Security, on foreign policy, on defense, on education, on taxes. How they’re awful in policy realms you never even thought of.

That left me thinking: Where are the two parties closest together? What goals do they have in common that will likely go unmentioned in Tampa and Charlotte?

At least in the realm of economic policy, the best answer is: Not much. The parties have a foundational disagreement on the size and scope of government. They have bitter fights over when to start winnowing the deficit, whether to raise taxes, how much to cut government spending and where to cut it. They have stark differences on most major programs, including Social Security and housing subsidies.

Moreover – and more importantly – the parties have little interest in supporting the other side’s policy proposals, no matter how much they might agree with them in private.

Even still, I thought of a few areas where the parties have common objectives. Here’s a rundown, and if I have forgotten anything, throw it in the comments.

Tax simplification. Both parties agree on the absolute necessity of reforming the addled, inefficient American tax code. That means eliminating much of the underbrush of credits, loopholes and expenditures and then reducing marginal tax rates.Of course, the devil is in the details. Just about every tax expenditure has a powerful interest group behind it. That is part of the reason why neither party has gotten specific about what they would put on the chopping block, and both anticipate a drawn-out fight during the tax reform process.

Regulatory simplification. Democrats and Republicans both support simplifying the regulatory code as well: Looking through the books, making rules simpler and clearer for businesses to follow and getting rid of outdated or duplicative regulations. To that end, the Obama administration has initiated a “look back” effort, requiring different governmental departments and agencies to scrub their regulatory codes. It has won applause from many thinkers on the right.

Fannie and Freddie. Both parties want them gone and a smaller government role in the mortgage market in the future. How to do it? Expect the parties to solidify their disagreements on that in the coming years.

Avoiding the fiscal cliff. On Jan. 1, according to current law, a host of tax breaks expire and huge, across-the-board budget cuts go into effect. In Washington, it’s called the “fiscal cliff,” or, colloquially, “taxmageddon.” According to the Congressional Budget Office, it would throw the economy right back into recession. Neither party wants that, so expect an agreement on some combination of short-term spending increases and short-term tax cuts after the election – though expect bitter fights on the means, if not the end. Many in Washington think that Congress will merely kick the can six months or a year down the road to leave time for negotiations.

Son of Debt Ceiling. Shortly after “taxmageddon,” perhaps sometime in February, the American government will exhaust its borrowing authority – meaning some unprecedented form of government default. It almost happened in the summer of 2011 and resulted in a credit downgrade. Neither party wants to go back there. Expect some agreement to lift the debt ceiling to come along with the deal to delay or otherwise soften the blow of the fiscal cliff.

Drill, baby, drill. The White House has approved new drilling in the Gulf and the Arctic. That’s something Republicans broadly support and would go even further on.

Start-ups. Propose a bill to help start-ups, see your legislation win bipartisan support and the president’s signature. Small businesses, and young businesses: Everybody loves them.

Iran sanctions. The White House has imposed stringent new economic and financial sanctions on Iran, with the aim of ending the country’s nuclear ambitions. They have won broad bipartisan support, and the American and European sanctions added in the last year have slashed the regime’s oil revenue.

Article source: http://economix.blogs.nytimes.com/2012/08/27/what-do-democrats-and-republicans-agree-on/?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

China’s 10-Year Ascent to Trading Powerhouse

December 9, 2011 by Leave a Comment

Sunday is the 10th anniversary of China’s joining the World Trade Organization — a membership that helped turn China into the world’s biggest economy after the United States. Companies and consumers worldwide have benefited from China’s emergence as a top trading partner. And yet, because of special breaks and loopholes for China when it joined the W.T.O., it still shields its domestic markets from foreign competition much more than any other big nation.

Consider that $49 microwave oven and $85,000 Jeep.

Microwave oven prices have plunged in the West over the past decade, largely because China has combined inexpensive labor, excellent infrastructure and heavy factory investment to produce the ovens and a wide range of other consumer goods for export, making creature comforts more affordable to customers around the world.

Further, W.T.O. rules against protectionism have made it difficult for countries in the West to limit China’s sixfold surge in exports during those 10 years, even as the Chinese flood of products has forced factory closings and layoffs elsewhere.

But price tags on imported cars at dealerships in Beijing, Shanghai and other Chinese cities signal how China has continued to protect its home market under the special terms of the W.T.O. agreement it negotiated before joining the trade group.

In the United States, prices for a Detroit-made Jeep Grand Cherokee start at $27,490. But in China, after tariffs and other protective fees, it sells for $85,000 or more. (It’s no surprise that Chrysler has sold fewer than 2,500 of them so far this year in China.)

Foreign trading partners often chafe at the way China uses the W.T.O. rules to its advantage.

The Chinese economy’s “spectacular rise would not have been possible without the open global trading system that China was able to benefit from during the past 10 years,” said Karel de Gucht, the European Union’s trade commissioner.

“At the same time,” he said, “China is having to increasingly recognize and respect not only the legal responsibilities it now faces as a member of a global rules-based body, but also the W.T.O. ‘spirit’ of promoting open markets and nondiscriminatory principles.”

Chinese officials have been effusive in the run-up to their W.T.O. anniversary. “We believe that our 10-year arrangement has been successful — the results of the past 10 years are welcome and a valuable inspiration,” Yu Jianhua, China’s assistant minister of commerce, said at a news conference last month in Beijing.

The roots of China’s economic model trace to the singular terms under which the nation joined the World Trade Organization, which now has 153 members.

Based in Geneva, the group was established in 1995 as the successor to an international framework called the General Agreement on Tariffs and Trade — GATT, as it was known — that had been mapped out in the early years after World War II.

After negotiating for 15 years to be admitted to GATT and then to the W.T.O., China was finally let in after agreeing to accept the W.T.O.’s broad free trade rules. But as all new members do, Beijing also had to negotiate a lengthy document, known as an accession agreement. It spelled out thousands of details tailored to the specifics of the economy of China, which then was still very much a developing country.

The agreement required China to lower its tariffs to levels below those of many other developing countries. But compared with most industrialized countries, China was allowed to impose considerably higher tariffs — tariffs China has retained even as its economy has subsequently grown to No. 2 in the world.

The clearest example of W.T.O. ascendance China-style may be in automobiles. Even though China’s auto manufacturing industry and car market are now both the world’s largest, China continues to shelter them behind the highest trade barriers of any large industrial economy.

It retains a prohibitive tariff of 25 percent on imported cars, for example, which helps explain why imports represent only 4 percent of the light vehicles sold in China.

Article source: http://feeds.nytimes.com/click.phdo?i=8ae419a0185b4801222ecd23f22936c2

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The Agenda: Fraud and Loopholes Deliver Small-Business Contracts to Big Firms

November 4, 2011 by Leave a Comment

The Agenda

How small-business issues are shaping politics and policy.

It’s been a busy season for combating fraud in government contracts for small business, for prosecutors enforcing the law as well as the legislators trying to improve it. But for both, it appears to be an uphill battle.

In June, the federal government charged two men with creating a fake small business to win a $100 million Defense Department contract. Two months later, a businessman pleaded guilty to obtaining to false citizenship papers, which he used to get a security clearance from the Department of Defense so that he could receive preferential small-business contracts.

In October, one man pleaded guilty to a scheme in which he and a partner vouched for the small-business status of each other’s company. That, in turn, led the Justice Department to uncover an alleged ring of bribery and kickbacks centered at Eyak Technology, or EyakTek, nominally a small business based in Virginia with a $1 billion contract to provide information and security technology to government agencies. An indictment announced on Oct. 4 claims that the company’s contracting director conspired with officials in the Army Corps of Engineers to steer federal purchases to an unnamed subcontractor. That subcontractor then inflated its bills — by $20 million, according to the indictment — and used part of the proceeds to pay off the Eyak and Army Corps officials.

The federal government is the world’s largest buyer of goods and service, and it is supposed to make sure that 23 percent of those purchases go to small businesses. In the case of economically disadvantaged businesses, government agencies can often set aside contracts and award them without putting them up for a competitive bid. The government perennially misses those goals, but most observers believe that the amount of small-business contracts the government does report masks a share that have in fact been diverted to larger companies. Fraud is an important, though unquantified, culprit.

Observers say government officials in charge of procurement are often too busy to look closely at a company’s small-business credentials. But the Small Business Administration’s inspector general, Peggy E. Gustafson, testifying in a Congressional hearing last week, said that her agency often did not effectively oversee the contracting programs and did not aggressively pursue companies that misrepresented themselves as small. The S.B.A., Ms. Gustafson said in her prepared statement, “needs to change its culture so that employees understand that their mission includes not only assisting small businesses but also ensuring accountability and integrity to prevent fraudulent and improper actions from depriving procurement opportunities for legitimate firms.”

Ms. Gustafson also said that despite the recent legal victories, seeking justice in a courtroom was difficult because a company that fraudulently identifies itself as small in order to win a federal contract usually fulfills the contract. “Without an associated and definable loss to the government, criminal prosecutors are sometimes reluctant to pursue action against these companies, or if they do pursue them, may only be able to obtain limited sentences,” she said.

That is not the case in the EyakTek case, where the government allegedly paid for the conspirators’ BMWs, first-class airfares and Cartier watches. But while the company itself was not implicated in wrongdoing — charges were only brought against its head of contracting — the allegations surrounding EyakTek raised other troubling questions about small-business contracting, because the company had a legally sanctioned leg up in the competition for small-business contracts. Eyak is what’s known as an Alaska Native Corporation, and with that designation, it is able to compete for contracts set aside for companies that participate in the S.B.A.’s 8(a) program. This is a program intended to help small, disadvantaged businesses — particularly those owned by minorities — by providing business training coupled with opportunities for no-bid contracts set aside just for them.

In the 1970s, Congress made Alaska Native Corporations a special class of 8(a) business. Unlike most businesses in the program, the Alaskan companies are not subject to a limit to the size of a no-bid contract. And while a typical 8(a) business must be managed by someone who meets the program’s definition of disadvantaged, that’s not the case with Alaska Native Corporations, which  tend to recruit executives with broad and deep ties across government agencies and pay handsomely for their experience.

These features have made Alaska Native Corporations very popular with government bureaucrats because they offer an easy way to meet small-business quotas. In 2009, according to the S.B.A.’s inspector general, Alaskan firms took in 26 percent of total 8(a) contract dollars. EyakTek and other subsidiaries of the Eyak Corporation together took in at least $338 million, according to a search of the federal contracting records performed by the American Small Business League, which lobbies for integrity in small-business contracting. (If a native company gets too big to participate in the program, the parent corporation can simply create a new company — another advantage not afforded other program participants.)

Any effort to change the rules for Alaskan companies is likely to meet stiff resistance in Congress. (Alaska’s representative, Don Young, is the second-ranked Republican in the House in terms of seniority and the sixth most senior of all representatives.)

Surprisingly, even trying to pass legislation to curb fraud is more difficult than one might expect. In her testimony, Ms. Gustafson proposed measures to make it easier to prosecute fraud and stiffen penalties for conviction, in part by defining a loss to the government as equal to the size of the contract.

A bill containing these provisions has passed the Senate, but Rep. Sam Graves, the chairman of the House Small Business Committee, faulted the Senate bill for, among other things, not including an exemption for honest errors. “The small-business affiliation rules are complex and are not intuitive, so I’m hesitant to potentially trigger jail time for companies that make a mistake,” he said in an interview with VetLikeMe, a newsletter for business owners who are wounded veterans, “although I agree that we need to more vigorously enforce the certification rules.” The House has not yet taken up the Senate bill.

Mr. Graves also expressed skepticism about a separate House bill, introduced last month, that would exclude the subsidiaries of publicly traded companies from the definition of a small-business contractor. The law already requires that recipients of small-business contracts must be independently owned and operated, but a American Small Business League spokesman, Brian Reeder, said a clarification was necessary. “Common sense says that independently owned means not publicly traded,” he said, “yet publicly traded companies and their subsidiaries receive contracts that government agencies put towards their small business goals.”

The bill was introduced by Rep. Hank Johnson, a Georgia Democrat, with support from 16 other Democrats. No Republicans sponsored the legislation, and Mr. Graves, the Small Business Committee chairman, opposes the bill “because it places further restrictions on how a small business can be organized and the source of its investment,” said a spokesman, Darrell Jordan. “At a time of record unemployment, Chairman Graves wants to support measures that help small businesses grow.”

Opposition to Mr. Johnson’s measure isn’t strictly partisan. The Georgia congressman introduced an identical bill last year, while Democrats were in charge. It died in committee.

Article source: http://feeds.nytimes.com/click.phdo?i=76f36b6cf33087176ebd9bce5c8eb29a

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Obama Deficit Plan Cuts Entitlements and Raises Taxes on Rich

September 19, 2011 by Leave a Comment

The plan, which Mr. Obama will lay out Monday morning at the White House, is the administration’s opening move in sweeping negotiations on deficit reduction to be taken up by a joint House-Senate committee over the next two months. If a deal is not struck by Dec. 23, cuts could take effect automatically across government agencies.

Mr. Obama will call for $1.5 trillion in tax increases, primarily on the wealthy, through a combination of closing loopholes and limiting the amount that high earners can deduct. The proposal also includes $580 billion in adjustments to health and entitlement programs, including $248 billion to Medicare and $72 billion to Medicaid. Administration officials said that the Medicare cuts would not come from an increase in the Medicare eligibility age.

Senior administration officials who briefed reporters on some of the details of Mr. Obama’s proposal said that the plan also counts a savings of $1.1 trillion from the ending of the American combat mission in Iraq and the withdrawal of American troops from Afghanistan.

In laying out his proposal, aides said, Mr. Obama will expressly promise to veto any legislation that seeks to cut the deficit through spending cuts alone and does not include revenue increases in the form of tax increases on the wealthy.

That veto threat will put the president on a direct collision course with the House speaker, John A. Boehner, who said last week that he would not support any legislation that included revenue increases in the form of higher taxes.

Mr. Obama’s proposal is certain to receive sharp criticism from Congressional Republicans, who on Sunday were already taking apart one element of the proposal that the administration let out early: the so-called Buffett Rule. The rule — named for the billionaire investor Warren E. Buffett, who has complained that he is taxed at a lower rate than his employees — calls for a new minimum tax rate for individuals making more than $1 million a year to ensure that they pay at least the same percentage of their earnings as middle-income taxpayers.

That proposal, which was disclosed on Saturday, was met with derision Sunday by Republican lawmakers, who said it amounted to “class warfare” and a political tactic intended to portray his opponents as indifferent to the hardships facing middle-class Americans.

Representative Paul D. Ryan, chairman of the House Budget Committee and a leading proponent of cutting spending on benefit programs like Medicare, said the proposal would weigh heavily on a stagnating economy.

On “Fox News Sunday,” Mr. Ryan said it would add “further instability to our system, more uncertainty, and it punishes job creation.”

“Class warfare,” he said, “may make for really good politics, but it makes for rotten economics.”

Administration officials said Sunday night that they were not including any revenue from the Buffett Rule in Mr. Obama’s overall $3 trillion proposal, adding that it was more of a guiding principle the president will adopt as budget negotiations with Congress advance.

Mr. Obama has been citing Mr. Buffett as he promotes his separate $447 billion jobs-creation plan. He proposes to offset the cost of that plan and to reduce future budget deficits through higher taxes on the wealthy and on corporations after 2013, when the economy will presumably be healthier.

Nonetheless, Republicans made clear on Sunday that higher taxes on the wealthy were not acceptable to them. Appearing on the NBC program “Meet the Press,” Senator Mitch McConnell of Kentucky, the Republican leader, said “it’s a bad thing to do in the middle of an economic downturn. And of course the economy, some would argue, is even worse now than it was when the president signed the extension of the current tax rates back in December.”

Under Mr. Obama’s proposal, $800 billion of the $1.5 trillion in tax increases would come from allowing the Bush-era tax cuts to expire. The other $700 billion, aides said, would come from a combination of closing loopholes and limiting deductions among individuals making more than $200,000 a year and families making more than $250,000.

Mr. Obama’s plan will hover over Congressional budget-cutting negotiations that are under way over the next two months. A bipartisan Congressional committee is charged with coming up with its own cuts by Dec. 23; otherwise $1.2 trillion in cuts to defense and entitlement programs will go into effect automatically in 2013.

Mr. Obama, however, is challenging the Congressional committee to go well beyond its mandate. “He’s showing them where they could find the savings,” one administration official said.

Liberal-leaning organizations were rallying behind Mr. Obama’s proposals on Sunday.

“The report that the president is planning to ask millionaires and billionaires to pay taxes at a higher rate than their secretaries pay is welcome news that will be wildly popular with voters,” said Roger Hickey, co-director of the Campaign for America’s Future, a progressive center, in a statement. “We applaud the president for heeding the advice from progressives that he go big on his jobs plan.”

The Obama proposal has little chance of becoming law unless Republican lawmakers bend. But by focusing on the wealthiest Americans, the president is sharpening the contrast between Republicans and Democrats with a theme he can carry into his bid for re-election in 2012.

Mr. Obama’s proposal is also an effort to reassure Democrats who had feared that he would agree to changes in programs like Medicare without forcing Republicans to compromise on taxes. Indeed, Mr. Hickey warned in his statement that the president should not raise the Medicare eligibility age, advice that Mr. Obama, so far, seems to have heeded.

Brian Knowlton contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=545e46e71c19b75ff033f857729f58bf

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