One trillion dollars in additional tax revenue over the next 10 years, fewer tax deductions and exemptions, and stricter enforcement of the nation’s tax laws are revenue-related centerpieces of President Barack Obama’s budget proposal. He unveiled it Tuesday, a month late.
Every budget also has a spending side. In addition to $1 trillion of additional revenue, the budget calls for $2.3 trillion of additional spending, going from $3.6 trillion to $5.9 trillion. That’s an increase of approximately 63 percent, or an average of 6.3 percent annually.
The national debt would likewise balloon, adding another $8.3 trillion. The national debt currently tops $17 trillion. But White House officials say the debt would actually shrink as a percentage of the nation’s gross domestic product.
“To build on the progress we have made in recovering from the Great Recession, the budget invests in research, clean energy, infrastructure, manufacturing and security, creating jobs now and building a foundation for long-term growth,” wrote White House Press Secretary Jay Carney in a column for USA Today.
“It supports a quality education for every child and helps give our workers the skills and training they need. It promotes economic opportunity and mobility, calling for an increase in the minimum wage to $10.10 per hour. And it includes a new Opportunity, Growth and Security Initiative, making investments in critical areas — fully paid for with spending reforms and by closing tax loopholes,” Carney wrote.
Others have their doubts.
‘Opposite of Kennedy Democrats’
“Today’s Obama Democrats are just about the opposite of everything the Kennedy Democrats stood for,” said Peter Ferrara, a senior fellow for entitlements and budget policy at The Heartland Institute. “President Kennedy proposed and campaigned on an across-the-board income tax rate cut for everyone, which after enacted produced a historic economic boom in the 1960s. Obama has persistently raised tax rates on employers, investors, and successful small businesses, and in his new budget calls for still another $1 trillion tax increase, even though federal data from the IRS and CBO show that the so-called ‘rich’ already pay far more than their fair share.”
The official White House announcement of the budget emphasized it
- “significantly strengthens” the Earned Income Tax Credit, which low-income earners receive;
- “proposes a significant expansion of the Child and Dependent Care Tax Credit”;
- “proposes to establish automatic IRAs (or auto-IRAs), which will expand access to and build on proven best-practices in the private sector to encourage workers to save”; and
- proposes several measures to help people with college, including by extending college tax credits, simplifying taxes for Pell Grant recipients, and excluding student loan forgiveness from taxation.
Republicans who hold the majority in the House of Representatives were less than happy with the president’s proposals.
‘More Complexity to Tax Code’
“Unfortunately, the president’s budget adds more complexity to the tax code and increases taxes for more Washington spending,” said House Ways and Means Committee Chairman Dave Camp (R-MI) in a statement. “That is the wrong direction.”
“This budget isn’t a serious document, it’s a campaign brochure,” House Budget Committee Chairman Paul Ryan (R-WI) told reporters.
Jason Fichtner, a senior research fellow at the Mercatus Center at George Mason University, expressed disappointment with the president’s lack of concern about fundamental tax reform.
‘Staggering Compliance Costs’
“If the president is serious about getting the United States on a path to fiscal health, his proposed budget must find ways to reduce the staggering compliance costs of the federal government’s overly complex tax code,” he said in a statement. “Reform must significantly reduce or eliminate special tax provisions and lower rates. A simplified tax code will yield a more equitable, higher-performance economy with more federal revenues while reducing economic and accounting burdens.”
“The impact of taxes on the economy extends beyond the revenue taken by the government: The compliance burden also results in foregone economic growth estimated at up to more than $600 billion annually,” Fichtner said.