(Bloomberg News) President Barack Obama's call for raising taxes by focusing on spending in the tax code was immediately rejected by top Republicans, signaling that any effort to increase the government's take from the economy would be difficult to move through Congress.

As part of a $4 trillion deficit-reduction plan announced yesterday, Obama said he wanted Congress to overhaul the tax code by lowering rates, eliminating tax breaks and generating more money than the current system does. The plan would allow tax cuts affecting high-income taxpayers to expire at the end of 2012 and would raise $1 trillion on top of that.

"Reform should protect the middle class, promote economic growth, and build on the fiscal commission's model of reducing tax expenditures so that there is enough savings to both lower rates and lower the deficit," Obama said in remarks at George Washington University in the capital, referring to a panel he appointed last year that outlined a similar tax plan.

Republicans, including House Speaker John Boehner and Senator Orrin Hatch, rejected Obama's argument that tax increases should be part of a deficit-reduction package.

"I don't think we're any closer to actually doing a bill than we were a day ago or a month ago," said Clint Stretch, managing principal of tax policy at Deloitte Tax LLP in Washington. "Given the fundamental disagreement on top rates and the fundamental disagreement on who should bear the tax burden, it's going to take a while for the parties to work together."

Republican Plan

Obama's task in raising revenue by curtailing tax breaks is similar to the one that House Republicans set for themselves last week. Representative Paul Ryan's budget plan calls for lowering top tax rates to 25% and keeping revenue at a level consistent with extending all income tax cuts permanently.

The president's $1 trillion target over 12 years is smaller than the Republicans' 10-year, $2.9 trillion goal. Both are ambitious enough that they would require Congress to examine the largest benefits received by U.S. taxpayers, including the deductions for mortgage interest and charitable contributions and the exclusion of employer-provided health care.

That's where the similarities end, and the two parties disagree on the amount of revenue to collect and on who should pay. Obama used his speech to draw distinctions between himself and congressional Republicans, in particular to his approach to the tax cuts scheduled to expire at the end of 2012.

'Can't Afford It'

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