The President’s $3.9 trillion FY 2015 Budget includes some very consequential and controversial proposals, including a generous expansion of the EITC for working families and caps on tax breaks for the wealthy ones.
The budget includes 175 proposals that impact revenues.
This includes the EITC tax cuts for 13.5 million working Americans, and also the proposals outlined below that would raise more than $1 trillion in revenues over the next 10 years by closing tax loopholes and hiking tax rates.
The proposals in the budget include a “Fair Share Tax” aka the Buffett Rule, under which high-income taxpayers with more than $1 million in earnings must pay at least 30 percent of it as income tax. This would raise $53 billion over the next 10 years.
Another similar proposal impacting those with earnings above $200,000 would limit the amount that may be claimed under itemized deductions and other tax exclusions to 28 percent.
So anyone in tax brackets above the 25 percent bracket would theoretically find the reduction in their tax bill capped at 28 percent of the deduction instead of 33 or 35 percent.
This proposal would be able to raise around $600 billion over the next 10 years.
Another proposal that would raise $28 billion seeks to ban contributions to tax-advantaged retirement accounts if the account holder’s total balance for all such accounts hits a certain level. The level is determined based on age, interest rates, inflation, etc.
The budget also seeks to lower the estate tax exemption level from the current $5 million to $3.5 million. The rate at which the estate is taxed would also go up from 40 to 45 percent. This proposal would raise $118 billion over the next ten years.
The enhanced revenues in the President’s Budget would reduce borrowing by another $1.4 trillion by 2024.
For 2015, it would reduce the deficit to $564 billion, down from $649 billion in 2014. BY 2024, the annual budget deficit would shrink to $434 billion.
Remember that these are all budget requests and not an enacted budget.
Raising the bar this high is helpful when the real negotiations begin with Congress, and this budget request also serves as an effective way to lay out the Democratic Party’s fiscal platform with the mid-term elections just around the corner.
President’s FY 2015 Budget – Download (pdf)
Photo credit - White House Photo by Pete Souza