President Barack Obama sent Congress a record $4 trillion budget on Monday, Feb. 2, pushing past tight federal spending caps. As outlined in his State of the Union address in January, the new budget plan would boost taxes on wealthy Americans and corporations and provide relief to the middle-class.
Obama’s budget, which will likely set off months of wrangling in Congress, proposes spending about $4 trillion in the 2016 budget year that begins Oct. 1 — a 6.4 percent increase over estimated spending for this year, projecting that the deficit will decline to $474 billion.
The new proposals are “practical, nor partisan,” Obama said.
Labeled “middle-class economics,” the President’s ambitious budget plan includes several major tax changes that would help uplift the middle class, improve the workforce with skilled employees, fund his $60 billion proposal to make community college free for two years, and raise at least $320 billion in increased taxes over 10 years.
“We need a tax code that truly helps working Americans trying to get a leg up in the new economy,” Obama said in his address on Jan. 20.
The Republican-led Congress has already found plenty to criticize in the tax hike proposals. They will respond this spring with a balanced-budget outline that promises to ease the burdens of the national debt on future generations, curb the explosive growth of expensive benefit programs, and reform the “loophole-cluttered” tax code.
The administration’s budget documents reveal that all the tax increases will total $2 trillion, including a number of proposals Obama made before to limit deductions the wealthy can take to reduce their tax bill.
The wealthy class would only be able to take tax deductions at the 28 percent rate even if their income is taxed at 39.6 percent, and would also see an increase in their maximum capital gains rate to 28 percent instead of 20.
For instance, a couple earning up to $120,000 a year would qualify for a new “second earner” tax credit of up to $500 as well as a maximum $3,000 child care credit for two children, triple the current credit of $1,000.
Obama’s budget plan also proposes to raise $95 billion over the next decade by hiking the current cigarette tax to $1.95 per pack.
In addition, the proposal for a six-year public works program—an estimated $478 billion—would upgrade the nation’s vast highways, bridges and transit systems; all major efforts to tap into bipartisan support for spending on badly-needed repairs.
The spending plan would ease tight budget constraints imposed on the military and domestic programs back in 2011, when lawmakers were responding to the public outcry over deficits that topped $1 trillion a year.
“[The budget represents] a strategy to strengthen the middle class and help hard-working families get ahead in a time of relentless economic and technological change,” the Obama administration said, also contending that various spending cuts and tax increases would trim the deficits by $1.8 trillion over the next decade.
Eliminating the budget caps—known as sequestration—will expectedly boost spending by $74 billion divided between the military and domestic programs in 2016. It would also result in a spending increase over the remaining six years the caps were to have been in place of $362 billion.
In a budget agreement reached in late 2013, the caps were eased but not eliminated for 2014 and 2015, but are due to go back in force in 2016.
“This country’s better off than it was four years ago, but what we also know is that wages and incomes for middle class families are just now ticking up,” Obama said in a Today Show interview. “They haven’t been keeping pace over the last 30 years compared to, you know, corporate profits and what’s happening to folks in the very top.”
“My job is not to trim my sails and not tell the American people what we should be doing, pretending somehow we don’t need better roads, that we don’t need more affordable college.”
(With reports from Associated Press)
