Wednesday, February 3, 2010

Wealthy Face Tax Increase

Budget plan, for which Radel staff of the Senate, has caused controversy in Congress about what to do with the tax benefits of the Bush era, President Obama wants to phase out the incentives to hold the deficit.

Washington - The $ 3.8 trillion budget for next year Obama laid to increase taxes on businesses and households with high income by $ 2 trillion over 10 years, as well as reducing the cost of the program with substantial political support. However, this does not relieve the nation from the growth of debt by $ 8.5 trillion in the next 10 years.

The budget plan for taxes in 2011 requires the growth of tax deductions equal to $ 1 trillion from families with incomes over $ 250,000 over the next decade, mainly due to expiration of the tax incentives introduced by the previous administration. Nevertheless, the Bush tax breaks for the middle class, plus cutting taxes already on the employment program will cost the Government to Obama's $ 284 billion over the next decade.

Banks and multinational corporations face new fees and charges. Oil companies lose $ 36.5 billion in tax breaks over the next decade.

Politically difficult choices in forming the budget underlines the deep fiscal hole, in which the country found itself after decades of deficits and deep recession. All this adds heat to the debate in an election year, about the size and scope of government activities, actions by paying Americans.

"All this shows that we are in much worse shape than the states," - said David Walker (David Walker), former chief financial inspector of the United States, which currently is president of Peter G. Peterson Foundation, a group of experts which focuses on reducing the budget.

Analytics budget says that the plan for the fiscal year that begins in October, shows the efforts of the obstacles in the way of Obama's closing the budget hole without raising taxes for the vast majority of Americans.

Obama's budget is subject to approval by Congress, and he is unlikely to pass without significant changes. In the past year, proposals to limit tax deductions for households with high incomes, and selling the rights to pollute the atmosphere with the purpose of investing these funds in priority areas, do not pass.

One of the conflicts with Congress, which is visible on the horizon, due to the fact that to do with introduced in 2001-2003, tax exemptions on income tax, capital gains, dividend tax and the inheritance, which all together due to expire in January 2011. Obama would extend the relief for the middle class and poor Americans, but would raise taxes for wealthy families, although it was unable to return to the levels of Bill Clinton (Bill Clinton).

The two top income tax rate would rise to 36% and 39,6% from 33% and 35% respectively. For families with incomes of $ 250,000, capital gains and tax rates rise to 20% from 15%. One can say that families with higher income would be faced with taxes of $ 969 billion in the period between 2011 and 2020.

The President ignored the opposition of Republicans against the reduction of costs, which he suggested. Many Republicans say that the budget can be balanced only by reducing costs. However, both parties agree that budget cuts should not affect the defense and the rights of people, such as the right to free medical care.

"What I do not welcome and that just will not accept, because this behavior is calculated for effect, while the camera is turned on and totally irresponsible policies when they are off," - said Obama. "It's time to save what we can spend what must once again live within our means."

Obama has called for the abandonment of the mission to the Moon National Agency for Aeronautics and Space, to stop further production of military transport aircraft C-17 and components for the Joint Strike Fighter, to cut the budget of Army Corps of Engineers and agricultural programs.

President's proposal for the budget for NASA - this is the beginning of the end of the future of American space travel "- said Senator Richard Shelby (Richard Shelby).

Saksbi Senator Chambliss (Saxby Chambliss) agrees with the decision of the president to "rein in government spending," but complained that the proposed budget "unjust is targeting farmers and ranchers to save money and assets obtained by the Washington program.

Even with the increasing taxes and reducing spending, Obama's budget provides a record budget deficit of $ 1.6 trillion in the fiscal year, slipping to $ 706 billion debt by 2014, only to start rising again, as the retiring baby boomers will cause jump up the cost of health and social welfare. By 2020, federal debt will grow from $ 7.5 trillion, or 53% of GDP last year, to $ 18.6 trillion or 77% of GDP.

Kenneth Rogoff (Kenneth Rogoff), Harvard University economist who has studied the experiences of other countries, said that the level of debt would push the U.S. to the point, reaching that interest rates may begin to rise, the dollar might collapse, but the economy will face a crisis. "We feel when we touch it quickly, and you do not want to get to this" - said Rogoff. "Having reached the mark of 80%, we have a real chance encounter with the above course of events."

Obama again said he plans to freeze spending on non-military programs, which constitute about 17% of the total budget. He promised to voice a financial model that satisfies both pariah and will propose ways to reduce the deficit in the short term, while the solution of tax problems, problems of social welfare and free medical service to be solved in the long term.

But the White House was cautious, saying the goal to achieve by 2015 "primary balance" between budgetary expenditures and revenues, not excluding interest payments on debt. MPE uses a standard primary balance for the poorest countries in the world trying to bring its financial condition in order.

Decrease in military spending that began during the Bush administration pushed back until 2012. Increase Obama's military contingent in Afghanistan and the withdrawal of troops from Iraq, known as "cross-border operations, will cost $ 160 billion this year and next, which is $ 46 billion more than projected earlier.

"We need to think more," - said Senator Judd Kregg (Judd Gregg) of New Hampshire, referring to the Republicans on the committee on the budget in the Senate. "I think that the American people are ready for tougher decisions than Congress."

The White House praised the economic growth of 3% for the fourth quarter of 2009 until 2010, which is slightly higher than the consensus forecast of Blue Chip in 2,9%. His estimate of growth for 2011 is 4,3% and is clearly more brilliant than the estimate of economists in 3,2%.

However, the forecast of the White House employment as gloomy as the forecasts of others. Council of Economic Advisers, the White House predicts a solid 10% unemployment rate for 2010 and its decline to only 9.2% in 2011, and up to 8,2% in 2012, which creates pressure on Congress to question the extension of insurance for the unemployed.

By Obama's plan, the budgets of departments of Agriculture, Commerce, Justice, Health, Social Services, Housing and Urban Development would be cut. Total expenditure at the discretion of Congress will drop to $ 1.38 trillion from $ 1.4 trillion. But with rising interest rates, social security, the cost of free medical care and medical services, total spending of the State grow from $ 85 billion to $ 3.76 trillion.




The Wall Street Journal

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