Obama pushing for targeted tax cuts as ‘fiscal cliff’ looms

President Barack Obama has called for a one-year extension of Bush-era tax cuts for US families earning less than $250,000 a year, seeking to put Republicans on the defensive and reinforce his campaign mantra of being a middle-class champion.

“Let’s not hold the vast majority of Americans and our entire economy hostage while we debate the merits of another tax cut for the wealthy,” Mr Obama said at the White House yesterday, standing in front of a platform filled with people who he said would be hurt if their tax cuts were not extended.

Republicans charge that allowing taxes to rise for wealthier Americans would hurt small business owners who are helping to create jobs in a tough economy, but Mr Obama said that 97 per cent of all US small business owners would fall under the $250,000-a-year income threshold.

“This isn’t about taxing job creators, this is about helping job creators,” he said.

Whether it gains traction or not, the Democratic incumbent’s move achieves several political goals.

It shifts the campaign conversation – at least for a day – from last week’s meagre jobs report and his handling of the economy to “tax fairness” and inequality in America.

It burnishes Mr Obama’s message of being the candidate who backs the middle-class while Republicans and their presumptive presidential nominee, Mitt Romney, favour the wealthy.

It also sets a baseline for what is likely to be a months-long debate about deficit reduction.

The tax cuts enacted by Republican President George W Bush, Mr Obama’s predecessor, will expire on 1 January without congressional action, part of a so-called “fiscal cliff” that could hit the US economy alongside deep automatic spending cuts.

Mr Romney has suggested Congress wait to act on the issue until January, when he hopes to take office.

His campaign said yesterday that Mr Obama’s move would amount to a “massive tax increase” on families, job creators and small businesses.

Spokeswoman Andrea Saul said: “It just proves again that the president doesn’t have a clue how to get America working again and help the middle class.”

Aside from the Republican reaction, Mr Obama’s move has political pitfalls as his fellow Democrats are divided about how to address the issue.

House of Representatives Democrat leader Nancy Pelosi has suggested that the income threshold for extending tax cuts be set at $1 million a year rather than the $250,000 limit Mr Obama wants.

Some Democrats oppose any extension, while others are wary of allowing taxes to rise for higher earners because of its economic impact.

Mr Obama’s re-election campaign will promote the president’s economic agenda in a series of events this week in battleground states, including New Hampshire, Colorado and Nevada.

Meanwhile, new figures showed Mr Obama’s campaign and the Democratic Party raised $71m in June, well below the $106m hauled in by Mr Romney and the Republican party during the same period. It was the second successive month that Mr Romney has raised more money than Mr Obama.

Obama officials have warned the fundraising deficit could harm the president’s chances of winning re-election.

On Sunday, Mr Romney privately raised millions of dollars from New York’s elite, while Democrats were launching co-ordinated attacks against the presumptive Republican presidential contender, intensifying calls for him to explain his offshore bank accounts and release several years of tax returns.

The line of attack, dismissed by the Romney campaign as an “unfounded character assault,” follows new reports that raise questions about Mr Romney’s personal wealth, which could exceed $250m.