President Barack Obama has sharpened divisions with his Republican rivals ahead of this year’s presidential election, with a 2013 budget proposal that more than doubles tax on the dividend incomes of high earners.

Mr Obama’s budget lifts the levy on dividends from 15 per cent to the top marginal rate, which will stand at 39.6 per cent in 2013 if all of the tax cuts introduced by George W. Bush expire as scheduled.

The plan to tax dividends as ordinary income applies to individuals earning more than $200,000 or married couples who take in over $250,000. The budget proposes lifting the capital gains tax rate from 15 to 20 per cent. The proposal amplifies the White House’s intensifying policy pitch that the wealthy should pay higher taxes to reduce the ballooning federal deficit, an approach Republicans have called “class warfare”.