US Democrats aim tax, spending cuts at rich to avoid 'meat ax'

This minimum tax would be separate from the income tax hike that started on Jan. 1 for households with incomes above $450,000 a year.

These added revenues for the Treasury, Van Hollen said, would be further augmented by eliminating a long-held tax break for the profitable oil and gas industry. And on the spending side, Democrats would end government payments to farmers that are largely enjoyed by big agricultural operations.

Asked whether he thought Obama would publicly embrace these savings to head off the "sequester" possibly next week in his State of the Union address to Congress, Van Hollen said: "We don't know exactly." He added, "There are other things that could be put into the mix" as well.

Those, he said, could include cutting the "carried interest" tax break enjoyed by investment managers. It allows mostly affluent individuals to pay a 20 percent capital gains tax rate on a big chunk of their income, rather than the top ordinary income tax rate of about 40 percent.

Another Obama move, Van Hollen said, could be ending a tax break for corporate jets, an idea that was kicked around in 2011 and at one point was supported by some key Republicans.

Obama told the meeting of Democrats earlier on Thursday that he is willing to agree to a "big deal" with Congress on spending cuts and tax reforms to end uncertainty over the US budget deficit, but insisted that new revenues be part of the package.

'DEFINITION OF DYSFUNCTION'

Republicans, however, are arguing that the window for tax hikes closed after Democrats successfully raised rates on the rich at the start of the new year.

"My constituents in Kentucky and the American people," warned Senate Republican leader Mitch McConnell on Thursday, "will not accept another tax increase to put off a spending cut that the two parties have already agreed to. It's the definition of dysfunction."

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