U.S. President Barack Obama has revealed a plan to reduce America's swollen deficit that would include raising taxes on the rich.

In a televised address from outside the White House, Obama said he wants to reduce the deficit by more than US$3 trillion over the next decade, through a combination of new revenues and cuts to mandatory benefit programs.

Under Obama's proposal, much of the new revenues would be generated by repealing Bush-era tax rates for wealthy U.S. couples making more than $250,000. He would also place limits on the tax deductions that wealthy Americans can claim. Those changes alone would bring in about $800 billion over 10 years, he said.

His proposal would also end certain corporate loopholes and subsidies for oil and gas companies.

The president's proposal would also reduce spending in mandatory benefit programs, including Medicare and Medicaid, by $580 billion. And the withdrawal of troops from Iraq and Afghanistan would allow a savings of $1 trillion over 10 years.

Obama explained that if the U.S. did not act now, the burden of debt would fall on future generations.

"Washington has to live within its means. The government has to do what families across the country have been doing for years: we have to cut what we can't afford, to pay for what really matters," he said.

He later said: "We can't just cut our way out of this hole," adding, "It's only right that we ask everyone to pay their fair share."

"Middle-class families shouldn't pay higher taxes than millionaires and billionaires," he said. "It's hard to argue against that.

"It's not class warfare, it's math."

Obama also suggested a so-called "Buffet Rule" – named after billionaire investor Warren Buffet who wrote an op-ed earlier this year saying he should pay more in taxes – to establish a minimum tax on all those making more than $1 million a year.

"Warren Buffet's secretary should not have to pay more in taxes than Warren Buffet," Obama said.

Obama's plan stands little chance of passing Congress, since Republicans control the U.S. House of Representatives and are firmly against any tax hikes to raise revenues.

But his goal is to try to influence a special joint committee of Congress that needs to come up with deficit reductions of up to $1.5 trillion over 10 years, by the end of November.

And, by focusing on wealthy Americans, Obama is attempting to highlight the contrast between Republicans and Democrats with a theme he can carry forward into his 2012 re-election bid.

The Republican reaction was swift.

"Veto threats, a massive tax hike, phantom savings, and punting on entitlement reform is not a recipe for economic or job growth -- or even meaningful deficit reduction," Senate Republican leader Mitch McConnell said in a statement issued mere minutes after the president's announcement.

"The good news is that the Joint Committee is taking this issue far more seriously than the White House."

If a deal is not reached and enacted by Congress by Dec. 23, $1.2 trillion in cuts to defence and entitlement programs will go into effect automatically in 2013.

Obama's plan, like virtually any in American politics, has proved to be divisive.

Melissa Haussman, a political science professor at Carleton University, called Obama's tax proposal "balanced."

"One has to deal with both the revenue problems and spending," she said on CTV News Channel Monday night. "Any approach that is balanced is the correct one."

Tom Velk, an economics professor at McGill University, argued that the savings in Obama's plans are "trivial."

"The spending that is going to go on for the next 10 years . . . is in amount of about $50 trillion to $60 trillion," he said. "(Obama's) numbers are completely inadequate to deal with that problem."

With files from The Associated Press