President Obama released a budget request Monday that calls for a significant increase in tax revenue, mainly at the expense of individuals making at least $200,000 per year in adjusted gross income or families making $250,000 per year. The budget has little chance of passing a divided Congress in an election year, but it gives some insight into how the administration will approach future budgets should Obama get re-elected.
The $3.8 trillion budget proposal would end the Bush-era tax cuts, raising income tax rates to pre-2001 levels and limiting non-charitable deductions. It also broadens the definition of “taxable income” to include certain municipal bond income, retirement plan contributions, and health insurance payments. Thus, more taxpayers will fall into the top tax bracket, and folks in that bracket will pay a higher rate of taxes.
According to U.S. Treasury estimates, the proposed tax changes would generate an additional $1.5 trillion in tax revenue over the next 10 years, most of it from the wealthiest 2 percent of taxpayers.
The budget calls for roughly $1 trillion in spending cuts, but it gave little detail about how those cuts would be enacted. It projects a federal deficit of $901 billion by the end of 2013.