Obama tax plan: $80 billion in cuts, five-minute filings

WASHINGTON (CNN) -- Sen. Barack Obama on Tuesday proposed overhauling the tax code to lower taxes for the poor and middle class, increase them for the rich and make it so most Americans can file their taxes in five minutes.

The tax relief plan he envisions for the middle class alone would mean $80 billion or more in tax cuts, he said.

Obama, an Illinois Democrat who is a front-runner for his party's 2008 presidential nomination, said during a speech at the Tax Policy Center that the present tax code reflects the wrong priorities because it rewards wealth instead of work.

"Instead of having all of us pay our fair share, we've got over $1 trillion worth of loopholes in the corporate tax code," he said. "This isn't the invisible hand of the market at work. It's the successful work of special interests." Watch Obama unveil his tax plan »

The result, according to Obama? "Gaps in wealth in this country grow wider, while the costs to working people are greater."

His plan means billions in breaks by nixing income taxes for the 7 million senior citizens making less than $50,000 a year, establishing a universal credit for the 10 million homeowners who do not itemize their deductions -- most of whom make less than $50,000 annually -- and providing 150 million Americans with tax cuts of up to $1,000.

"I'd reward work by providing an income tax cut of up to $500 per person -- or $1,000 for each working family -- to offset the payroll tax that they're already paying," he said.

"Because this credit would be greater than their income tax bill, my proposal would effectively eliminate all income taxes for 10 million working Americans."

Obama also said he would repeal the Bush tax cuts for the wealthiest 1 percent of Americans.

"At a time when Americans are working harder than ever, we are taxing income from work at nearly twice the level that we're taxing gains for investors," Obama said. "We've lost the balance between work and wealth."

Obama's plan is similar in many ways to his Democratic rivals, including Sen. Hillary Clinton, D-New York, and former Sen. John Edwards, D-North Carolina.

Both Edwards and Clinton rolled out their tax plans earlier this year -- with Clinton calling for "rolling back some of President Bush's fiscally-irresponsible tax breaks for the highest income Americans," and Edwards pledging to "get rid of Bush's tax cut for people who make over two hundred thousand dollars a year."

Tuesday's announcement in Washington is part of an economic policy push by Obama. On Monday he was at the NASDAQ headquarters in New York City chastising Wall Street executives for looking out for themselves rather than helping the middle class.

Obama also said he'd simplify the tax code so that any employed American with a bank account can do their taxes in minutes if they take the standard deduction. It makes sense, he said, because the Internal Revenue Service already collects wage and bank account information.

"There's no reason the IRS can't send Americans pre-filled tax forms to verify," he said. "This means no more worry. No more wasted time. No more extra expenses for a tax preparer."

Obama proposes funding the tax cuts by closing corporate loopholes, cracking down on international tax havens and increasing the dividend-and-capital-gains tax for the wealthy, he said.

He called his proposal a "fair" alternative to the present tax code and said it was necessary because hard times on Main Street translate to hard times on Wall Street.

"When the changes in our economy are leaving too many people behind, the competitiveness of our country risks falling behind," he said. "When that dream of opportunity is denied to too many Americans, then ultimately that pain has a way of trickling up." E-mail to a friend

CNN's Paul Steinhauser contributed to this report.

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