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State Of The Union: Obama Takes Aim At Do-Nothing Congress, Focuses On Income Inequality, Tax Reform (VIDEO, PHOTOS)

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WASHINGTON - A passionate U.S. President Barack Obama delivered a campaign-style State of the Union address on Tuesday, taking aim at a "do-nothing" Congress and attempting to fan the flames of populist anger about income disparity as the clock ticks down on November's election.

"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," Obama said, "or we can restore an economy where everyone gets a fair shot, and everyone does their fair share, and everyone plays by the same set of rules."

What's at stake, Obama said in his third State of the Union address, "are not Democratic values or Republican values, but American values. We have to reclaim them."

He had harsh words, however, for his congressional foes in the Republican party even though he ended his 75-minute address in a rousing appeal for unity.

"As long as I'm president, I will work with anyone in this chamber," he said inside the ornate chamber of the House of Representatives, packed with legislators, Supreme Court justices and his cabinet secretaries.

"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," he said as an annoyed looking John Boehner, Republican speaker of the House of Representatives, sat behind him.

Obama's repeated refrain throughout the speech was: "Send me a bill," even though that's an unlikely prospect now more than ever as an election looms and Republicans are dead set against handing him any legislative victories.

Nonetheless, the president asked lawmakers to send him legislation on everything from job creation to a bill that would prevent insider trading by members of Congress, citing the "corrosive influence of money in politics."

The annual State of the Union address is one of the U.S. capital's most anticipated events, one rife with pomp and circumstance, as hundreds of lawmakers gather to listen to the president map out his intentions for the year to come. An estimated 43 million viewers tuned into last year's address.

Some legislators, in fact, show up 12 hours before the speech, hoping to snag a coveted aisle seat in the hopes they'll be televised greeting the commander-in-chief.

Gabrielle Giffords, the Arizona congresswoman seriously injured by a would-be assassin's bullet last year, got a prolonged and heartfelt standing ovation when she entered the chamber on Tuesday night. She's retiring from Congress to focus on her recovery.

As Obama made his way to the lectern, he stopped to embrace Giffords, whose husband, astronaut Mark Kelly, sat in the presidential box with First Lady Michelle Obama.

Giffords, along with her Democratic colleagues, frequently got on her feet to applaud the president, helped up by a Republican colleague. The applause was particularly lengthy when Obama pointed out his policies had resulted in the death of 9-11 mastermind Osama bin Laden earlier this year.

For months, Republicans have been maligning Obama as "campaigner in chief." The president has indeed spent weeks travelling the country, pointing the finger of blame at Republicans for the gridlock in Congress.

He accuses them of preventing his administration from implementing policies that would help struggling Americans get back on their feet.

In his address on Tuesday night, Obama also pushed for tax fairness, a pet cause that's been given a shot in the arm by both the enduring strength of the Occupy Wall Street movement and by Mitt Romney, the president's potential rival in next November's election.

Under intense pressure, the Romney campaign has released the candidate's tax information. It reveals he earned more than US$42 million over the past two years, almost all of it investment income, and has paid an approximate 14 per cent income tax rate.

That rate is well below the highest income tax rate on wages in the United States — 35 per cent — since American tax laws favour investment income over wage income, particularly in recent years.

"We need to change our tax code so that people like me, and an awful lot of members of Congress, pay our fair share of taxes," Obama said.

The president pushed for the so-called Buffett Rule, named after investor Warren Buffett, the billionaire Democrat who famously complained that his secretary pays tax at a higher rate than he does. The Buffett Rule would mandate that income generated by investments is taxed at the same rate as wages.

Buffett's secretary, Debbie Bosanek of Nebraska, was invited to the State of the Union by the White House. She too sat in the presidential box with Michelle Obama.

"Tax reform should follow the Buffett rule: If you make more than $1 million a year, you should not pay less than 30 per cent in taxes," Obama said in what seemed a subtle swipe at Romney.

"On the other hand, if you make under $250,000 a year, like 98 per cent of American families, your taxes shouldn't go up. You're the ones struggling with rising costs and stagnant wages. You're the ones who need relief."

He dismissed Republican accusations that such proposals are divisive.

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

Obama was applauded again by Democrats as he pointed out the U.S. economy is showing signs of recovery despite the situation he'd inherited from the George W. Bush administration. He lashed out at the financial industry for its role in the worst recession since the Great Depression.

"Let's never forget: Millions of Americans who work hard and play by the rules every day deserve a government and a financial system that do the same," he said.

"It's time to apply the same rules from top to bottom: No bailouts, no handouts, and no cop-outs. An America built to last insists on responsibility from everybody."

Energy was also a key element of the president's State of the Union. There was no mention of TransCanada's Keystone XL pipeline, however, as Obama pointed out he's presided over an oil production boom since he took office.

"Right now, American oil production is the highest that it's been in eight years," said Obama. "Not only that — last year, we relied less on foreign oil than in any of the past sixteen years."

Obama also repeated his call for the elimination of $4 billion in oil industry tax breaks. He's called for those subsidies to be scrapped in previous budget proposals, but the measure has yet to pass Congress.

Romney, meantime, went after Obama in a "prebuttal" ahead of the State of the Union. He accused the president of "shameful" divisions.

"Tonight we're going to be treated to more divisive rhetoric from a desperate campaigner-in-chief. It's shameful for a president to use the state of the union to divide our nation," Romney said in Tampa, Fla., where he's campaigning before next Tuesday's state primary.

"Three years ago, we measured candidate Obama by his hopeful promises and his slogans. Today, President Obama has amassed an actual record of debt, decline and disappointment .... President Obama has been building a European-style welfare state."

Another Republican officially rebutted Obama's State of the Union.

"We do not accept that ours will ever be a nation of haves and have-nots; we must always be a nation of haves and soon-to-haves," said Indiana Gov. Mitch Daniels.

The choice of Daniels to deliver the rebuttal raised some eyebrows. Many in the Republican establishment are still hoping he might join the Republican race in the face of Newt Gingrich's unexpected surge past Romney in the polls. Gingrich has few fans among the Republican elite.

In his rebuttal, Daniels assailed the Obama administration for its recent rejection of Keystone XL, among other criticisms.

"The extremism that stifles the development of homegrown energy, or cancels a perfectly safe pipeline that would employ tens of thousands, or jacks up consumer utility bills for no improvement in either human health or world temperature, is a pro-poverty policy," he said.

"It must be replaced by a passionate pro-growth approach."

Obama ended his address on a positive note, passionately urging Americans to come together as he told the chamber that one of his proudest possessions is the flag the Navy SEAL team took with them on the bin Laden mission.

"On it are each of their names. Some may be Democrats. Some may be Republicans. But that doesn't matter," he said.

"Just like it didn't matter that day in the Situation Room, when I sat next to Bob Gates — a man who was George Bush's defense secretary; and Hillary Clinton, a woman who ran against me for president .... As long as we're joined in common purpose, as long as we maintain our common resolve, our journey moves forward, our future is hopeful, and the state of our union will always be strong."

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