State of the Union

Obama wants higher taxes on rich, incentives for jobs

Seeks 30% rate on top earners; boosts housing, clean energy aid

In the State of the Union last night, President Obama called for a halt to job exportation.
Saul Loeb/Associated Press
In the State of the Union last night, President Obama called for a halt to job exportation.

WASHINGTON - President Obama pledged last night to use the transformative role of government to rescue the middle class and restore tax fairness, calling on Congress to be a partner in easing economic anxieties.

In an assertive, expansive State of the Union address, the president proposed that the richest Americans - earners of more than $1 million a year - be made to pay at least 30 percent in taxes. The proposal creates a stark contrast to those Republicans seeking to replace him by pitching less government and more tax cuts.

“We need to change our tax code so that people like me, and an awful lot of members of Congress, pay our fair share of taxes,’’ Obama said. “Washington should stop subsidizing millionaires. In fact, if you’re earning a million dollars a year, you shouldn’t get special tax subsidies or deductions.’’

The tax proposal was one of several challenges the president, in his third State of the Union, put forth to a bitterly divided Congress in an election year. Those challenges included calls for incentives to expand clean energy, help homeowners take advantage of historically low interest rates, and rebuild the country’s infrastructure.

Making a plaintive request for both parties and government branches to work together, Obama evoked the mission of the Navy Seals team who, together and regardless of their individual beliefs, hunted down Osama bin Laden.

“All that mattered that day was the mission,’’ Obama said. “No one thought about politics. No one thought about themselves.’’

The 30 percent minimum tax idea, however, stands little chance of action this year. Instead, it’s likely to form one of the key planks for his reelection bid. Not only does it fundamentally set Obama apart from the Republican field, it puts him in the middle of a roiling national debate over wealth and power inequalities.

Hours earlier, GOP contender Mitt Romney released his 2010 federal income taxes, showing he paid only about 14 percent on about $21 million in income, mostly investments. The rate is lower than that of many middle-income wage-earners.

Those Americans were the intended recipients of Obama’s pitch.

“You’re the ones struggling with rising costs and stagnant wages. You’re the ones who need relief,’’ said the president. He then alluded to what has become known as the “Buffett Rule.’’

“Now, you can call this class warfare all you want. But asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense.’’

The “Buffett Rule’’ was coined after billionaire investor Warren Buffett criticized the system for allowing him to pay a lower rate than his longtime secretary, Debbie Bosanek. To drive home the point, Obama’s advisers had Bosanek seated in first lady Michelle Obama’s box, along with other invited guests.

The president has spoken of the Buffett Rule in general terms many times; last night was the first time he attached a minimum tax rate to the principle.

The top tax rate for the wealthiest Americans is 35 percent, but the vast majority pay much less than that. For those like Romney who earn a bulk of their money through investments, which are mainly taxed at 15 percent, rather than wages, the effective rate plummets.

In his 65-minute address, Obama did not mention Romney, or any Republican presidential rival, by name. But the implications embedded in his pitch, cast against the events of the day, were clear.

“If you had a thought bubble over the House chamber, 99 percent would be thinking Mitt Romney,’’ said Larry Sabato, director of the University of Virginia Center for Politics. “It’s a comment on Mitt Romney without mentioning Mitt Romney. Considering that 99 percent don’t make what Romney makes, that’s a pretty good move.’’

White House officials spent a good part of the day before the speech downplaying the political nature of the proposals, and the president himself said what he was pitching was based on universal principles of fair play.

“We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by. Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules,’’ the president said, to thunderous applause.

“What’s at stake are not Democratic values or Republican values, but American values. And we have to reclaim them.’’

Obama said he would not let a divided Congress and an election year impede his work with lawmakers to accomplish several goals. He also, however, warned he’s ready to take action without them.

“As long as I’m president, I will work with anyone in this chamber to build on this momentum,’’ Obama said. “But I intend to fight obstruction with action, and I will oppose any effort to return to the very same policies that brought on this economic crisis in the first place.’’

Emphasizing his point, he authorized public land use for a solar and wind energy zone because, he said, Congress has not budged on his previous plan to create incentives to invest in clean energy. The energy created would be enough to power 3 million homes, he said.

In professing to work with Congress, the president has, at least temporarily, gained the upper hand in the realm of public opinion. His approval ratings, which tumbled last summer amid the showdown with Congress over raising the nation’s debt limit, have been edging up. A Washington Post-ABC News Poll conducted last week found his approval rating is 53 percent.

Only 13 percent of the respondents gave a favorable approval rating for Congress, the lowest since the poll began four decades ago.

The president began his address by citing his successes abroad - the return of troops from Iraq and Afghanistan - but the night was focused on the troubles that have menaced the country since he came into office: a languishing economy and high unemployment.

To that, Obama broadly laid out plans to provide tax incentives for businesses to bring jobs back into the country. Conversely, he said he would seek to eliminate deductions companies can claim for moving jobs overseas.

“It’s time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America,’’ Obama said. “Send me these tax reforms, and I’ll sign them right away.’’

In coming days the president will also deliver a plan to Congress that will allow every homeowner the opportunity to refinance their mortgage at historically low interest rates and save about $3,000 a year by imposing a small fee on the largest financial institutions. The program would not add to the federal deficit.

He also said the Justice Department would create a unit of state and federal prosecutors to investigate the mortgage-lending practices that contributed to the credit meltdown in 2008 and to the lingering housing crisis.

The issue of underwater home values is particularly salient in early primary states where property values have plummeted such as Florida, where Republican candidates are fighting for votes, and Nevada, where the nomination process goes next.

Obama warned though that none of his proposals would come to fruition without both parties working together. “None of these reforms can happen unless we also lower the temperature in this town,’’ he said. “We need to end the notion that the two parties must be locked in a perpetual campaign of mutual destruction; that politics is about clinging to rigid ideologies instead of building consensus around common sense ideas.’’

Tomorrow the president will begin a three-day, five-state tour in Iowa and Arizona, where he is expected to release more details of his plans for revitalizing the manufacturing industry.

Globe reporters Bobby Caina Calvan and Matt Viser contributed to this report. Tracy Jan can be reached at