On April 10 the president released a $3.77 trillion proposed budget that uses tax hikes and entitlement reforms to cut the federal deficit by $1.8 trillion.
Proposed $3.77 Trillion Budget Includes Tax Hikes and Entitlement Cuts
On April 10, President Obama proposed a $3.77 trillion budget for fiscal year 2014 that would cut the federal deficit by $1.8 trillion with a combination of tax increases and cuts to entitlement programs.
The largest revenue-raiser by far is the proposed 28 percent cap on itemized deductions for the top three tax brackets, which is estimated to raise $529 billion over 10 years. The most controversial spending cut for Democrats is the switch to a chained consumer price index (CPI), which would slow the cost-of-living increases for Social Security benefits. The White House estimates that the switch to the chained CPI would raise $230 billion over 10 years.
The president once again proposed a 30 percent federal tax rate for those earning more than $1 million annually. Taxpayers would be allowed a deduction for charitable contributions and a phase-in period for incomes between $1 million and $2 million. Under the Obama budget, investment fund managers would see their 20 percent tax rate on investment income give way to taxation as ordinary income.
The administration’s fiscal year 2014 budget plan would impose a new $3 million contribution limit on tax-deferred retirement accounts, estimated to raise $9 billion over 10 years, and raise taxes for tobacco products that the White House estimates would bring in $78 billion. The federal tax on cigarettes would increase by 94 cents to $1.95 per pack.
The budget proposal would also eliminate $39 billion of special tax breaks for big oil companies over the next 10 years, expand and make permanent the research credit, allow small business to deduct up to $500,000 in investment expenses, and eliminate special depreciation rules for corporate aircraft and tax breaks for companies with earned income overseas.
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