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A Quick Look at President Obama's Budget Proposal

The president’s budget proposal is not likely to pass Congress “as is,” but it does present his point of view and probably a rough idea of what we can expect.  That expectation is wholly consistent with what we have been telling our clients and listeners – plan on higher taxes in the years to come. 

Among the specifics included are:

Achieving a $1.8 trillion deficit reduction by raising $600 billion in new revenue by:

  • Reducing a high income earner’s current 39.6% benefit on itemized deductions to 28%
  • Implementing a “Buffett Rule” that imposes a minimum tax rate of 30% on those earning over $1 million a year

The other $1.2 trillion of the $1.8 trillion in proposed deficit reduction will come from:

  • $200 billion: defense and nondefense discretionary
  • $400 billion: Medicare, federal health programs, mainly impacting hospitals and pharmaceuticals
  • $600 billion: programs including agricultural subsidies and unemployment insurance

President Obama wants to boost the economy, raise taxes, and trim the deficit by $1.8 trillion over the next 10 years (the plan would replace the automatic sequestration currently in place). 

That is an impossible balancing act -- stimulus, austerity, and transfer of wealth from high-income individuals and corporations.  Nevertheless, it may lead to a compromise that will surely be better than what we have now.

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