President Obama and congressional Democrats are proposing to replace the impending spending "sequestration" with a variety of revenue-raising tax changes. Republicans have quickly dismissed Democratic proposals and said the country cannot afford to use tax increases to support overspending.

The sequestration was originally scheduled to force across-the-board spending cuts beginning on Jan. 1, 2013, but was delayed two months by the American Taxpayer Relief Act of 2012. These unpopular spending cuts are now scheduled to become effective on March 1. The current government funding agreement is set to expire on March 27, and the suspension of the federal debt limit will end on May 19. Republicans and Democrats appear no closer to an agreement on these issues.

President Obama said last week that the sequestration should be postponed with a combination of spending cuts and new revenue. He did not offer specific revenue raisers, but White House Press Secretary Jay Carney said the administration supported changing the taxation of carried interest, changing the depreciation rules on corporate jets, repealing tax incentives for oil and gas, and capping the value of deductions at 28%. The president has proposed all of these revenue raisers before.

Congressional Democrats have also begun offering their own proposals. Sen. Carl Levin, D-Mich., proposed a new version of his Cut Unjustified Tax Loopholes Act, which includes several international tax changes to increase taxes on offshore income, a change in the taxation of carried interest and a provision to limit the deduction for stock options to the expense booked for financial accounting purposes. Sen. Bernie Sanders, I-Vt., introduced a separate bill with several international tax changes, including an end to U.S. companies' ability to defer tax on offshore income.

House Speaker John Boehner, R-Ohio, rejected Democratic calls to replace spending cuts with tax increases and said the sequestration should be replaced only through spending cuts and reform. House Ways and Means Chair Dave Camp, R-Mich., also dismissed Obama's proposals, calling on lawmakers to instead consider real tax reform.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.