1:05 PM New York – President Obama proposed tax incentives for manufacturing and a large corporate tax overhaul that could lower maximum tax rate and levy minimum taxes on filers with more than $1 million of income. Republicans vowed to stymie the plan that cuts the military spending by only 1%.
President Obama proposed his last annual budget that focused on creating job, providing economic stimulus, shifting tax burden on wealthy and lower the gigantic deficit.
The proposed budget fell short of the Obama’s promise to cut in deficit by half at the end of his term and is sure to face stiff opposition from Republicans who prefer higher military spending and end the Medicare program.
President Obama sent $3.8 trillion budget to U.S. Congress that will cut 1% budget of defense program and the Environmental Protection Agency by 2%, shift a slight increase in tax burden to wealthier individuals and increase spending for job training and highway construction and education.
Republican Representative Paul Ryan, chairman of the House Budget Committee described President Obama’s cut of 1% in defense as “hollows out” of the national security, the proposal to increase burden of tax on wealthy as “massive taxes on small businesses and families” and less than 5% cut in Medicare as “bureaucratic rationing.”
White House Budget Targets Cuts and Higher Taxes
President Barack Obama announced fiscal 2013 budget that includes incentives to create jobs, infrastructure spending and close tax loopholes for corporations and a higher tax on dividend income for the wealthiest tax payers.
The proposed budget of $3.8 trillion is the last budget annual budget of his term projects deficit below $1 trillion and estimates government spending to fall to sustainable level by 2017.
The current year budget is expected to generate deficit of $1.33 trillion or 8.5% of the economy compared to the September estimate of $956 billion.
The budget proposed by Obama estimated deficit to drop $901 billion or 5.5% of the gross domestic product compared to the previous estimate of $648 billion in September.
The proposed budget would raise taxes on dividends for those who earn more than $250,000 to 39.6% from the current 15% and impose a minimum tax for individual filers with annual income of at least $1 million.
White House budget plan includes higher Medicare premiums for wealthier recipients from 2017, impose $61 billion in higher fees on big financial institutions over ten years and terminate $41 billion of credits and deductions that subsidize oil and gas industries.
President also proposed overhaul of the corporate tax system that will end several loopholes and lower the current maximum rate of 35%. The details of the plan are expected to be released later in the month.
Small businesses will be offered different tax breaks including capital gains relief on inventory adding to $25 billion and tax relief measures that are expiring in December worth $26 billion would be extended till the end of 2013.
The proposed budget anticipated the cost of war to decline to $97 billion, first annual cost below $100 billion since 2004 and the Pentagon budget will be trimmed by $5 billion to $525 billion.
The EPA budget would shrink by 2% to $8.3 billion and the Department of Housing and Urban Development would declined by 7.5%.
However, the Department of Veterans Affairs budget is slated to increase 4% to $61 billion and Department of Education’s budget would grow 3.5% to nearly $70 billion.
The budget also includes measures to stimulate manufacturing that sets aside $121 billion over the next ten years to expand manufacturing and offer tax breaks for clean energy vehicles and repatriating jobs back from overseas.