OF MONEY AND POLITICS : OBAMA SAYS ALL MUST PAY ‘FAIR SHARE’ OF TAXES

President Obama opened his reelection campaign with a combative State of the Union speech, proposing to require that millionaires pay at least 30% of their income in taxes and to eliminate deductions that save companies money if they move jobs overseas.

He also proposed rewarding businesses that manufacture and create jobs in the U.S. with lower corporate tax rates.

Heavy in emphasis on income inequality and its causes, the president’s speech included several ideas already snubbed by House Republicans, including a program to upgrade roads and bridges and a fee on banks to help “responsible” homeowners refinance their mortgages.

The plans drew lines for a year of partisanship between now and the November election.

Obama hopes to campaign as the protector of an endangered middle class suffering under an unfair system. If Americans want to make it through tough times and build a stable economy, he argues, the affluent should shoulder more of the burden, and government should take an active role in spurring job growth.

“We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by. Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same rules,” he told a joint session of Congress gathered in the chambers of the House of Representatives. “What’s at stake are not Democratic values or Republican values, but American values. We have to reclaim them.”

Republicans argue that higher taxes will kill jobs and that Washington needs to cut spending instead.

“The president’s policies have made our economy worse,” said House Speaker John A. Boehner (R-Ohio). “And you know, the president’s policies, again, are just going to double down on what hasn’t worked.”

Withdrawal from two wars and success in the fight against Al Qaeda will be key parts of Obama’s reelection campaign. He opened Tuesday night’s speech by paying tribute to service members as he listed those accomplishments.

As he spoke, the gallery of the House provided an illustration of the conflicting narratives Republicans and Democrats will tell as the election year unfolds. Michelle Obama was surrounded by veterans of Iraq and Afghanistan. They included the admiral who led the operation that killed Osama bin Laden and a gay Air Force intelligence officer who is now allowed to serve openly because of the repeal of the “don’t ask, don’t tell” policy.

Obama twice referred to the death of Bin Laden and said he kept the flag that Navy Seals carried with them on that mission last May. As he closed his 65-minute speech, he pointed to the Seals’ teamwork and called for lawmakers to work together.

“Each time I look at that flag,” he said, “I’m reminded that our destiny is stitched together like those 50 stars and those 13 stripes.”

As he entered the House chamber, Obama found and embraced Rep. Gabrielle Giffords (D-Ariz.), who returned to say farewell. She is expected to resign her seat Wednesday to concentrate on recovering from a gunshot wound suffered more than a year ago when a man opened fire while she spoke with constituents in Tucson. Twelve others were wounded and six people died. Giffords’ husband, retired astronaut Mark E. Kelly, sat with Michelle Obama.

Boehner’s list of invited guests spanned oil company managers, including one from ConocoPhillips, and backers of the controversial Keystone XL pipeline that Obama has shelved, for now, pending further study.

Other unmentioned characters also played a role in the evening’s stage play. On the same day that Republican presidential candidate Mitt Romney disclosed that he pays about 15% in taxes on millions in income, Obama spelled out a legislative agenda that would ensure those who make $1 million or more pay at least 30%.

Obama has pushed for higher taxes for the most affluent for much of his tenure, without success. Months after coming up with the “Buffett Rule” -- which says high-earners like billionaire Warren Buffett should pay the same tax rate as those who earn less -- Obama added the 30% target to his wish list.

Seated in the gallery for the announcement was Buffett’s secretary, who, as Buffett and the president frequently point out, pays a higher income tax rate than her boss.

“You can call this class warfare all you want,” Obama said. “But asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense.”

The 30% minimum rate would mean a tax hike for many top earners. The average effective tax rate for the top 1% last year was 26%, according to a study by the nonpartisan Tax Policy Center.

In a shot at Romney and other Republican presidential contenders who criticized the administration’s 2009 decision to bail out General Motors and Chrysler, Obama noted his plan had worked.

“We bet on American workers. We bet on American ingenuity. And tonight, the American auto industry is back” and has added nearly 160,00 jobs, he said. Republicans largely sat silent.

Taxes were not the only area in which Obama stressed proposals that Republicans opposed.

He called on Congress to send him a version of the Dream Act, designed to grant citizenship to some undocumented immigrants who were brought to the U.S. as young children. Even if Congress cannot agree on comprehensive immigration reform, he said, “let’s at least agree to stop expelling responsible young people.”

Obama also called for a full-year extension of the payroll tax cut, which is due to expire at the end of February. It was one of the few lines that drew bipartisan applause.

As he did last year during the fight over the tax break, the president is taking his proposals to the public. That strategy helped reverse a slide in his approval ratings last fall when he launched his campaign against a “do-nothing Congress.” Obama departs Wednesday morning for a three-day trip around the country. He will unveil details about central elements of his plan as he visits Iowa, Arizona, Nevada, Colorado and Michigan -- all states he hopes to win in November.

The president’s blueprint calls for spurring manufacturing through several changes to the tax code. He wants to wipe out the deductions that many companies get for the costs of shutting down a factory in the U.S., such as for mothballing the building or doing environmental remediation.

If those companies open factories overseas, administration officials say, they shouldn’t qualify for deductions.

Obama also proposes making companies pay a minimum tax for profits and jobs overseas, giving American corporations less of an incentive to relocate their businesses to other countries. Aides to the president say he will name a specific tax figure around the time he unveils his new budget, expected the second week of February.

In hopes of easing the continuing housing crisis, the blueprint suggests imposing a fee on banks to help cover the costs of refinancing for distressed homeowners.

“Responsible homeowners shouldn’t have to sit and wait for the housing market to hit bottom to get some relief,” he said.

Some advisors to the president say they believe some collaboration with Congress is possible, especially if Americans rally behind the ideas. But a jaded faction within the White House expects little or no cooperation.

Obama alluded to the bitter battles that paralyzed Washington for much of the last year -- as well as his determination to confront those who oppose him.

“As long as I’m president, I will work with anyone in this chamber to build on this momentum,” he said. “But I intend to fight obstruction with action, and I will oppose any effort to return to the very same policies that brought on this economic crisis in the first place.”

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cparsons@latimes.com

kathleen.hennessey@latimes.com

James Oliphant and Lisa Mascaro in Washington contributed to this report.