The tax increases would mostly fall on the wealthy, through a new 30 percent minimum tax on those earning more than $1 million annually, allowing Bush-era tax cuts to expire for families taking home more than $250,000 and capping the value of itemized deductions for top earners, according to administration officials who briefed reporters on the document set for release Feb. 13.
Taxes would also rise for large financial institutions, through a Financial Crisis Responsibility Fee, and also for oil, gas and coal companies.
Obama is seeking $350 billion in short-term jobs measures, including additional infrastructure spending, extending unemployment benefits and increasing aid to cash strapped state governments. He would also extend an expiring payroll tax break for the rest of this year.
“The budget targets scarce federal resources to areas critical to growing the economy and restoring middle-class security,” a White House fact sheet released yesterday said.
Much of the president’s budget plan repeats proposals that have already been rejected by Republicans, including a 10-year, $3 trillion deficit reduction package offered to Congress in September. In addition to laying out the president’s priorities, the blueprint is designed to highlight the differences between the two parties’ agendas as the November election nears.
Recipe for Debt
“This unserious budget is a recipe for debt, doubt and decline,” said Brendan Buck, a spokesman for House Speaker John Boehner, an Ohio Republican. “It would make our economy worse by imposing massive tax increases on small business and still pile up enormous debt that stirs greater economic uncertainty.”
House Republicans promise a sharp contrast when they unveil their own budget plan next month. The plan will offer “a choice of two futures: our vision, our solutions versus the path the president is putting us on,” House Budget Committee Chairman Paul Ryan, a Wisconsin Republican said yesterday. His plan probably will reprise last year’s call for overhauling Medicare, slashing spending and eschewing any tax increases.
The administration forecasts this year’s deficit will be $1.3 trillion, or 8.5 percent of the nation’s gross domestic product. The budget shortfall would eventually fall to as little as $575 billion, or 2.7 percent of GDP by 2018, according to an administration summary.
Under $1 Trillion
A $901 billion deficit next year translates to 5.5 percent of GDP, according to the administration, and would be the first time since Obama took office that the shortfall fell below $1 trillion.
The plan, for the fiscal year that begins Oct. 1, would wring $360 billion in savings out of Medicare and Medicare over the next decade.
Another $278 billion in savings would come from farm subsidies, federal workers’ retirement plans and the Pension Benefit Guaranty Corporation, which insures company pensions. Defense spending would fall by 5 percent from last year’s levels, according to the summary. The budget also relies on what Republicans call an accounting trick to count hundreds of billions in savings tied to the drawdown of the war in Iraq.
Winners in Plan
Among the winners in the plan would be college students and their families, who would see an expiring tax break designed to defray tuition costs extended.
A pending rise in student-loan interest rates would be postponed, the number of work-student jobs would be expanded and the maximum Pell Grant for poor college students would be kept at $5,635 through 2014-2015. Congressional Republicans had proposed cutting the maximum grant by 15 percent last year.
Also, the plan would provide new incentives for universities to rein in tuition costs. And the budget will contain a new $5 billion program to encourage states and schools to train and reward teachers, the administration said.
Manufacturing would be another winner, with a 19 percent increase in spending for advanced manufacturing research and development. It would eliminate tax breaks the White House says encourage manufacturers to send jobs overseas while offering tax incentives for companies to invest in areas hit hard by job losses.
Obama’s plan to revamp the corporate tax code won’t be released until later this month, according to the administration official, who briefed reporters on condition of anonymity.
The fact sheet didn’t include the administration’s updated economic projections. The budget will project an average unemployment rate of 8.9 percent this year and 8.6 percent next year, though the administration said the forecast was completed in mid-November before recent jobs data showed the economy on the mend.