President Obama's FY 2014 Budget and its Impact on You
President Obama has proposed his Fiscal Year 2014 Budget. The President's budget seeks to cut spending while at the same time raising revenues through tax increases. The $3.7 trillion budget would result in a 2014 fiscal deficit of $744 billion and is estimated to reduce the deficit by 1.7 percent over the next decade. The President's budget, if enacted, will replace the $1.2 trillion in mandatory sequestration cuts which went into effect in early March.
The FY 2014 budget includes nearly $1.8 trillion in deficit cuts. Significant reductions would come from cutting Social Security benefits, primarily through the reduction of cost of living increases. Reductions to Medicare, farm subsidies, the postal service, federal employee retirement programs and unemployment benefits also figure prominently in the President's proposal. Cuts in defense and other discretionary spending are estimated to save $200 billion. Medicare and other federal health programs will see $400 billion in reductions. Non-health spending, including agricultural subsidies and cuts in unemployment insurance will save an estimated $600 billion.
Tax increases figure prominently in President Obama's budget. Increases on wealthy taxpayers are expected to raise $580 billion in new revenues. A key component of the FY 2014 budget is the inclusion of the Buffett Rule which mandates that all households earning over $1 million pay at least a 30 percent tax rate. Tax deductions for upper income earners would be limited to 28 percent and contributions into tax deferred retirement accounts would be capped at $3 million. Investment managers would see their taxes increase, with the proposal calling for carried interest to be taxed at the same rates as ordinary income. Taxes on tobacco products would also increase to help fund Pre-K programs. Businesses who raise wages or hire new workers will be available for a tax credit.
The budget proposal also includes new spending. Investments in high tech manufacturing, innovation centers, clean energy, and early childhood education figure as priorities. Additionally, at least $50 billion has been allocated to repair roadways and bridges and fund infrastructure modernization projects.
The submission of the President's budget will provide a starting point for Members of both houses to hash out the details for a compromise. Currently, Republicans remain opposed to any more tax increases or reductions to Defense spending, while many members of the Democratic Caucus oppose the proposed cuts to Social Security, Medicare and other entitlement programs. It is clear that in in order to reach an agreement, both Republicans and Democrats will be forced to compromise key priorities.