Obama’s Budget - Payback
Monday, March 02, 2009
Last week, President Obama delivered a $3.6 trillion budget proposal to Congress that he hopes will “break from a troubled past” with government having a much more expansive role, numerous tax increases on affluent families and businesses, and spending cuts targeted at those he says profited from ambitious policy prescriptions in decades” and focuses on the role that the federal government will have in providing national health care, education and shifting the US away from oil and gas. Obama believes that government can do some of what the private sector has done better. Understand there will be bigger government and that will only come at a cost – most likely in the form of higher taxes and not just on the rich – I guarantee… consumption taxes, personal property taxes and sales taxes.
To finance his proposals, the president has clearly chosen winners and losers—with the affluent heading the list of losers.” Obama’s speeches have sounded much more moral, his tone reflecting that of one governing far from the left. The anger Obama has shown recently was not on the campaign trail. Mr. Obama wrote, “Prudent investments in education, clean energy, health care, and infrastructure were sacrificed for huge tax cuts for the wealthy and well-connected. In the face of these trade-offs, Washington has ignored the squeeze on middle-class families that is making it harder for them to get ahead… There’s nothing wrong with making money, but there is something wrong when we allow the playing field to be tilted so far in the favor of so few.“
Obama’s budget seeks to raise approximately $634 billion from tax changes to the wealthy, outlined below, as well as cuts in government spending that would be used to extend health care coverage to 47 million people in America who are uninsured and subsidize premiums for those that can’t afford the health care they have.
The budget will seek to raise approximately $315 billion over the next ten years from increased income taxes on the affluent, as defined by those couples making $250,000 or singles making $200,000 per year or more will rise sharply – beginning in 2011. The proposal raises the top income tax rates to 36% and 39.6% from 33% and 35%.
The budget also seeks to raise $318 billion over the next 10 years by limiting the deductions on mortgage interest and charitable donations for the wealthy. If you and your family are in the 33% to 35% income tax bracket, you will see the deduction go to 28%. For example, if you had $1,000 in mortgage interest, you will only be able to deduct $280 versus $350. The same rule would apply to charitable deductions – if you were getting a 33% to 35% deduction, it will decrease to 28% by 2011.
Business will have to pay as well. The budget envisions raising approximately $210 billion over the next decade by limiting the ability of U.S.-based multinational companies to shield overseas profits from taxation. Additionally, $24 billion would come from hedge fund, real estate investment trusts and private equity managers, whose income would be taxed at income tax rates, not capital gains rates or 39.6% vs. 15%. Oil and gas companies would be hit particularly hard, with the repeal of multiple tax credits and deductions.
Hope, accountability and a call to action is what President Obama called for in his inaugural address. Just as Obama took an oath, I want you to take an oath today that you will start to take control of your financial life!! I want you to make a commitment to yourself and your family that 2009 will be the year that you will work to build a solid financial foundation, protect what you have and work hard to have secure financial future. I urge you to take action – now. 
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