This article was last updated on January 12
In his speech before a joint session of Congress President Obama promised to deliver America from the current financial crisis and restore the nation to its former glory by promoting 21st century industries, reforming health care and implementing a more sound financial and taxation system. To do this he said that more money would be required (in addition to the recently passed $787 billion economic stimulus), but that over the next 10 years the additional prosperity will enrich all Americans and lower future budget deficit(s) and the $10 Trillion national debt.
See this article for details on the 2011 Presidential Budget
The budget plan projects a federal deficit of $1.75 trillion for 2009, or 12.3% of the gross domestic product, a level not seen since 1942 as the U.S. plunged into World War II. Federal deficits would remain above $500 billion annually for the next decade under…sending the national debt soaring to $23 trillion by 2019
The details of the $3.6 trillion budget for fiscal 2010 (which looks out over 10 years) were revealed today by the President and here’s are how Americans will be impacted from some of the budget reforms. I will update these items as the budget progresses through Congress, so if you haven’t already I encourage you to subscribe (free) via Email or RSS to get the latest updates.
Extend to 2013, the “Making Work Pay” $400/$800 tax cut for workers, originally enacted as part of the economic stimulus plan. It also seeks to make permanent the expansion of the child tax credit and the newly enlarged college credit now called the American Opportunity Tax Credit
Let tax cuts expire for families making more than $250,000: The president said he wants to “end the tax breaks for the wealthiest 2% of Americans.” The Tax Policy Center estimates that making the 2001 and 2003 tax cuts permanent for everyone would result in a $1.7 trillion loss in revenue over 10 years. Letting the tax cuts expire for only high-income filers could reduce that loss to $949 billion.
Reinstate the top two Clinton-era tax rates of 36 percent and 39.6 percent in 2011, up from the 33 percent and 35 percent the richest Americans now pay. It would raise taxes on capital gains and dividends to 20 percent for top earners, up from the 15 percent set by former President George Bush in 2003.
End tax breaks for companies shipping jobs overseas (and promote domestic employment) by eliminating a provision that allows U.S.-based companies to defer paying tax on the profits of their foreign subsidiaries until the money is brought back to the United States. Often those profits never make it back to U.S. shores. Obama might want to require companies to pay U.S. income tax when the profits are earned, no matter where in the world.
Updating the alternative minimum tax (AMT) for inflation. This would add $150 billion to the deficit by 2013. The AMT was originally designed to make sure the wealthy paid at least some taxes, but it threatens to ensnare some 24 million middle- to upper-income taxpayers next year.
Reducing health care costs
Talk to anyone today and most – Republican or Democrat – would agree that almost no one is getting good value for their health care dollars. Some experts say that 30% or more of what the nation spends may be going for tests and treatments of little or no lasting benefit. Here’s what President Obama wants to do:
Create a $634 billion “reserve fund” to pay for reforming health care over the next 10 years. Administration officials argue that it will take a big investment up front to drastically overhaul the health care system, but that over that over the long term the nation will reap significantly improved and cheaper health care. I imagine the President is going to have to work very hard to justify this kind of spending, which is similar in size to the economic stimulus plan
The reserve health fund Obama wants to set aside for health care would be divided between spending reductions and tax increases. It would trim $316 billion over 10 years from Medicare. Some of the savings would come from scaling back payments to private insurance plans that serve older Americans, which many analysts believe to be inflated. He has pledged to save the average family $2,500 a year on health-care costs
The health care proposal would also limit tax deductions for upper-income individuals and families, raising about $318 billion over 10 years.
Look for more updates to this post (as more budget details are released) focusing on how regular Americans will benefit from the budget now and into the future.
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