President Barack Obama proposes to spend $634 billion - around 20 per cent of the $3 trillion US federal budget for fiscal 2010 - on healthcare over the next decade.

The president also wants Congress to raise taxes on the wealthy and cut medicare costs for the uninsured thereby expanding government subsidised health coverage.

With two stimulus plans, including a permanent $400 tax cut for most workers and an additional $75 billion to cover the costs of wars in Iraq and Afghanistan through September, the budget deficit for 2009 is expected to shoot up to $1.75 trillion.

The deficit has gone up from $1.5 trillion estimated earlier as more money may be needed to bail out banks and other big US corporates.

The budget also proposes higher income tax rates – from 35 per cent to 39.6 per cent - and lower tax rebates for couples making more than $250,000 a year, beginning 2011.

Much of the $634 billion spending on healthcare coverage would come from cuts in Medicare insurance payments to private companies.

Upper-income beneficiaries will, however, have to pay a higher premium for Medicare's prescription drug coverage.

Obama also proposes to reduce tax rebate for wealthier people from mortgage interest, charitable contributions, local taxes and other expenses to 28 per cent from the earlier 35 per cent. Obama wants the top rate to go up to 39.6 per cent.

The proposal for universal healthcare coverage is bound to hurt health insurance companies while tax on charities would invite the wrath of  institutions and nonprofit bodies that depend on wealthy donors.

The budget also proposes an updated alternative minimum tax for inflation, which could add $150 billion to the deficit by 2013. The AMT was originally designed to make sure the wealthy paid at least some taxes, but it threatens to ensnare some 24 million middle- to upper-income taxpayers next year.