BIG BUDGET – President Obama is asking for a $3.5 trillion budget for fiscal year 2010, creating the biggest U.S. deficit since World War II. A $1.75 trillion deficit for the 2009 fiscal year is projected in Obama’s first budget. That is equal to 12.3% of GDP…the largest share since 1945 when the country ran a shortfall of 21.5% of GDP. The complete budget blueprint is available at www.whitehouse.gov. Here’s a brief summary as provided by:
HEALTH CARE – President Obama’s budget proposal includes $634 billion for health care reform. The budget does not lay out a road map for achieving universal health care coverage, although it does contain a series of principles that the Administration says must be included in the final reform plan. According to the Congressional Budget Office, the number of uninsured Americans could rise by 10 million to 54 million in the next 10 years if lawmakers don’t take steps to control health care costs and expand coverage. President Obama calls the $634 billion a substantial “down payment” for funding a health reform plan and will create reserve fund to pay for what experts predict will be a $1 trillion cost for health care reform. The reserve fund will be funded by tax increases on high income earners and cuts in Medicare.
NEW INCOME TAXES – The budget also includes tax proposals that will benefit the middle income taxpayers and increase tax liability for those with adjusted gross income (AGI) of $200,000 (individual) and $250,000 (married couples filing jointly.) The top marginal tax rate would go from 35% to 39.6% in 2011. The budget proposal also extends the AMT “patch.”
ESTATE TAXES REMAIN THE SAME – The budget would make permanent the 2009 rules for estate taxes…$3.5 million per individual exemption, 45% rate, and preservation of step up in basis rules.
CAPITAL GAINS AND DIVIDENDS – The capital gains and dividends tax rate would go from 15% to 20% in 2011, but only for individuals earning $200,000 or more ($250,000 or more if married filing jointly).
HEDGE FUND MANAGERS HIT HARD – “Carried interest” would be taxed as ordinary income, rather than capital income. This means that income paid to hedge fund managers would be viewed as compensation rather than as a return on capital contribution. The result is tax based on income at the potential 39.6% rate, rather than the old capital gains rate of 15%.
PAY-AS-YOU-GO – The budget calls for enacting into law Congress’ pay-as-you-go rules. Pay-go rules require that any spending increase or tax cut be offset by corresponding spending cuts or tax increases.
REGULATORY REFORM – The budget also calls for complete reform of the regulatory system governing the financial services industry, including insurance, securities and banking. The budget also calls for a reserve fund of $250 billion to stabilize the financial services industry as well as a 13% increase in funding for the SEC.
HOW MUCH? – The proposed $3.55 trillion spending plan is equivalent to $11,833 for every person and $25,573 per taxpayer. Does that include “taxpayers that pay no taxes?,” you ask? Yes it does!