President Obama's new budget plan doesn't just propose spending a historic amount of money over the coming decade. It also seeks to jack up the amount of tax revenue, all in the name of Mom, apple pie, and the great American middle class.
Politico identifies "biggest and boldest among his tax proposals." The estimated revenue would be collected over 10 years. Among the highlights (emphasis in original):
2. LIMITING ITEMIZED DEDUCTIONS FOR THE WEALTHY: Obama wants to limit the value of itemized deductions used by the wealthy, such as mortgage interest, to 28 percent of their income[*]. As it stands now, a write-off of $1,000 by a person in the top 40 percent bracket saves the taxpayer $400. Under the proposal, that same write-off would save that taxpayer just $280 because the value of the break is capped. Would raise $640 billion….
3. CAPITAL GAINS: The administration wants to hike the top rate to 28 percent from the current rate of about 25 percent with various surcharges, while expanding the number of things that would be subject to it. It would do that by cracking down on what's known as a "stepped-up basis."
Here's how it works: If you were to sell stock for $1 million that you bought for $100,000, you would pay capital gains taxes on the $900,000 profit. But if you die, and your kid gets the stock, he or she would be excused from paying taxes on the $900,000. For your child, the new starting point in calculating capital gains taxes would be the $1 million, so that $900,000 would escape taxation. It's a tax break that would mostly, though not exclusively, benefit the wealthy.
The administration's plan would end the stepped-up basis "loophole," though it would add various provisions aimed at shielding the nonwealthy and small businesses from having to pay the tax. Would raise $208 billion….
9. TOBACCO TAX: The administration proposes to nearly double taxes on cigarettes and small cigars to about $1.95 per pack from about $1.01 per pack, and index the tax for inflation. The hikes would pay for two politically powerful initiatives: an extension of the Children's Health Insurance Program — which is due to end this year if Congress doesn't extend funding — and Obama's ongoing proposals to guarantee universal access to preschool. Would raise $95 billion.
Congressional Republicans have declared Obama's budget "dead on arrival." Brain dead on arrival would be a better description. It seeks to spend $4.1 trillion in fiscal 2016, up from about $3.9 trillion in 2015. The main reason for spending more? To generate jobs, invest in the future, blah blah blah. The same rhetoric that Obama has used in every speech that he has ever given. The idea that the government might do more with less—or better yet, less with less—has never crossed his mind. The only way forward into the future is to do more less with more.
The 10-year spending and revenue plans that are included in budget plans are always jokes, but Obama doesn't even fake reaching budget balance and in fact shows growing deficits over time. At the same time, he increases defense spending in 2016 (the only year that really matters in any budget document since it's the only one that's actually under direct consideration during negotiation). So who knows, maybe Republicans, who had no trouble spending the country to oblivion during the Bush years, will go along. In any case, under their 2015 budget plan, the country would be spending $4 trillion in 2018, just two years later than Obama proposes.
For the entirety of the 21st century, we've seen the federal budget hit historic highs while national debt piles up and stupid, nonsensical, and failed policies and pursuits ranging from the wars in Iraq and Afghanistan to the drug to mass surveillance of Americans have eroded trust and belief in the government's ability and authority to dictate terms in our lives. Large majorities of Americans distrust the government and think it is trying to do too much.
And the response of the two major parties is, on the one hand, to spend even more money for the foreseeable future. And on the other hand, there's Obama's plan, which spends slightly more.
[*]: Economist David Henderson writes in to note that in fact Obama "wants to limit the tax break to 28% of their interest," not income.