Obama’s $3.8 Trillion Dollar Budget Calls for Entitlement Cuts, Billions in New Taxes for “Job Creators”

President Barack Obama’s $3.8 trillion dollar 2013 budget calls for taxing dividends received by high-income taxpayers as as ordinary income, raising the top rate to 39.6 percent from 15 percent. Married couples making more than $250,000 a year and individuals making more than $200,000 would treat dividends as ordinary income.

The proposal is estimated to raise $206.4 billion over 10 years, compared with current rates.

The president also wants to raise top individual’s income tax rates to 39.6 percent, up from 35, and tax capital gains at 20 percent, up from 15 percent.

The administration said that setting the top capital gains and dividend tax rates at 20 percent “reduces the tax bias against equity investment and promotes a more efficient allocation of capital.” Before 2003, all dividends had been taxed as ordinary income.

The proposal is part of Obama’s attempt to tap the wealthiest Americans to reduce the federal budget deficit.

The budget would impose a 30 percent minimum tax for individuals with annual incomes of at least $1 million, known as the “Buffett rule” after billionaire investor Warren Buffett.

The wealthy are not the only ones who would feel the pain of the president’s budget.

There are planned cuts to some energy programs, farm subsidies and federal workers’ retirement plans.

The Low-Income Home Energy Assistance Program will be slashed from $4.7 billion in 2011 to $3 billion next year, while oil, gas and coal producers would lose  $40 billion in tax breaks over the next decade.

$360 billion would be trimmed off of spending on federal health programs, such as Medicare and Medicaid. Those cuts would be felt primarily by providers, including drug companies, rather than the sort of broad restructuring that many analysts say will be necessary to control costs.

$700 million will be cut from the Agriculture Department with direct subsidy payments to farmers being phased out. The department also plans to close about 260 regional offices located primarily in smaller rural communities, which wold result in about 900 job losses.

The Environmental Protection Agency’s budget will be cut for the third straight year, this time by 1.2 percent, cutting money to the states and for hazardous cleanup.

Following the past 2 years of a cost of living pay freeze for federal employees, the administration will require they contribute an increase of 0.4 percent to their retirement program over three years. A federal employee making $50,000 a year would have to pay an additional $600 each year.

Employment at the Defense, Agriculture and Interior departments would all drop by 1%.

The president’s budget would almost double spending on the U.S. infrastructure over the next six years. $350 billion would go to boosting the economy  including $30 billion for school modernization and $30 billion to help states retain teachers and first responders. An estimated $140.8 billion will go to to research and development, including a 19 percent increase, to $2.2 billion, in spending on advanced manufacturing research and development.

Republicans were quick to attack the presidents budget.

“The president has ducked responsibility; he has punted again,” House Budget Committee Chairman Paul Ryan (R-Wis.) told reporters, saying it would lead to “America drowning in debt” and “slower economic growth” because of increased federal government borrowing. “It’s a political plan for the president’s reelection.”

House Speaker John A. Boehner (R-Ohio) called it “a gloomy reflection of his failed policies of the past, not a bold plan for America’s future” while he promised that Ryan would soon offer “an honest budget” that would rein in future debt.

Republican lawmakers weren’t the only ones who have a problem with the budget.

Congressional Black Caucus Chairman Emanuel Cleaver (D-Mo.) said “This budget is a nervous breakdown on paper. We’re still in a recession, we’re still struggling. Unemployment is still too high”.

Cleaver also said  he praised Obama for attempting to tackle challenging fiscal issues, but feared that GOP pressure “for the federal government to turn the spigot off completely” could push the nation “deeper” into economic turmoil.

The president’s budget projects a budget deficit of $1.33 trillion for the fiscal year beginning Oct. 1, equivalent to 8.5% of gross domestic product. That would mark the fourth straight year of deficits exceeding $1 trillion.

Advertisements

Leave a comment

No comments yet.

Comments RSS TrackBack Identifier URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s