The plan unveiled Monday includes tax increases for oil, gas and coal producers, investment managers and U.S.-based multinational corporations. The plan would allow Bush-era tax cuts to expire at the end of 2012 for individuals making more than $200,000 and married couples making more than $250,000. Wealthy taxpayers would have their itemized deductions limited, including deductions for mortgage interest, charitable contributions and state and local taxes.
"These policies were unfair and unaffordable when enacted and remain so today," Obama said in his budget message.
Obama's proposal would extend tax credits for college expenses and child care, as well as a more generous Earned Income Tax Credit for the working poor. The plan would enhance and make permanent a popular business tax credit for research and development, and would provide tax breaks for investing in advanced manufacturing and for making commercial buildings more energy efficient.
Many of the tax increases were in the president's previous budget proposals, offered when Obama could expect a more friendly reception from Congress. Lawmakers from both political parties, however, have been wary of limiting the ability of high earners to deduct charitable contributions out of concern it will hurt non-profit organizations.
A group of Senate Democrats has come out in favor of raising taxes on oil and gas companies, but Republicans, who generally oppose such tax increases, have the votes to block them in the Senate.
House Majority Leader Eric Cantor, R-Va., called Obama's proposal a missed opportunity to address the nation's fiscal problems.
"We need a government that finally does what every other American has to do in their households and their businesses, and that's to live within our means," Cantor said in a statement. "Instead, President Obama's budget doubles down on the bad habits of the past four years by calling for more taxes, spending and borrowing of money that we simply do not have."
Obama has called for reforming individual income taxes and corporate taxes, saying he wants to eliminate special interest tax breaks and use the additional revenue to lower overall tax rates. Obama's budget proposal, however, breaks little new ground on the issue.
"Successful comprehensive tax reform is a long process, often taking several years," Obama says in his budget message. "But even though it is a daunting task, we cannot afford to shirk from the work."
In December, Congress extended through 2012 a series of tax cuts enacted under former President George W. Bush. Obama's proposed new budget calls for letting the tax cuts expire for the wealthy at the end of 2012, while making them permanent for individuals making less than $200,000 and couples making less than $250,000.
Republicans want to make all the tax cuts permanent, setting the stage for a showdown that could play out in the middle of the 2012 presidential election.