It seems as though every few months there is a budget crisis brewing in Washington, D.C. The next big battle is over the 2014 budget, which, as expected, focuses on spending and tax hikes. But what is being proposed?
Well, first of all, there is more than one proposal on the table. The House and Senate are proposing their own alternatives — and they are basing their numbers on different amounts. The House assumes that the sequester will remain in place, while the Senate assumes that it will end. This means that the starting points for these budgets are different.
And, of course, there’s the President’s proposed budget.
Many people aren’t too worried about the spending aspects of the budget. After all, recent polls found that only 22% of those surveyed said that the sequester affects them significantly. As a result, budget cuts for the future aren’t likely to be a huge sticking point — at least not yet.
What a number people are interested in is whether their taxes are going to go up. The answer to that question, as usual, depends on who you are. For the most, what happens with taxes is being framed in terms of hikes on the wealthy.
President Obama’s Tax Increases
While there is likely to be a lot of talk about increased taxes, the reality is that the President’s budget proposal only boosts Federal tax revenues by $851 billion over the next 10 years, most of it accomplished through tax hikes on those considered wealthy. Here are some of the highlights of the president’s planned tax hikes:
- Limits to the types of itemized deductions those in higher income brackets can take.
Addition of the “Buffett Rule,” which includes a 30% minimum tax on those considered wealthy.
- Limits to how much can be accumulated in IRAs and other retirement accounts to $3 million, preventing the deductions and tax breaks that come with some contributions.
- Returning to the estate and gift tax rules seen in 2009.
- Fees charged to large banks, as well as a clean-up tax on companies that pollute.
- Boost the tax on cigarettes.
According to the Center for Tax Justice, personal income taxes on the wealthy increase by 4% over the next 10 years under this plan (estate and gift taxes go up by 40%), while corporate taxes go up by 1%.
Of course, this plan is far from set. Congress is on vacation right now, but it will come back in September, ready to tackle the issue of the budget. It has to be decided by September 30, which is the end of the fiscal year, so that things are ready to go on October 1. However, visions of a possible government shutdown are already arising, since it doesn’t seem as though Republicans and Democrats can agree on acceptable tax hikes coupled with spending cuts. Every faction seems to have its ideas of how things should go, and no one seems willing to compromise. At least, not at this point. We probably have a few more weeks of political grandstanding to go before anyone really gets down to brass tacks.