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Barack Obama on the budget and taxes
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Thanks to the slim majority Democrats hold in Congress, deficit hawks have failed to reverse President Bush's 2001 tax cuts. That is likely to change if Barack Obama wins the presidency in November.
Like many in his party, Obama is critical of Bush's tax cuts. But don't call his plan a tax hike. Obama argues that he is merely reversing some of Bush's tax cuts while slashing taxes further for 95 percent of American workers. On paper, 2 percent of the wealthiest Americans would see their taxes raised, but not above pre-Bush tax cut levels.
Deficit hawks on both sides of the aisle attribute the skyrocketing federal deficit to Bush's tax cuts. Many won't be thrilled with Obama's tax plan because the middle-class cuts will result in a net reduction, not increase, in federal coffers. Any lowering of the federal deficit will most likely be due to spending decreases under Obama's plan.
Obama has promised to adhere to Pay-Go spending rules, which dictate new spending be paid for by reduced spending elsewhere or higher tax revenues, but he has waffled on this issue as a candidate. In early 2008, Obama supported waiving Pay-Go rules for an economic stimulus package. As president, however, Obama promises to restore Pay-Go and balance the budget by other means -- require more transparency for pork-barrel spending, go after foreign tax shelters, eliminate subsidies and tax loopholes for Big Energy, and encourage competition for federal contracts.
Other aspects of Obama's tax and budget plan include:
- Restore earmarks spending to 1994 levels or below
- Crack down on Medicare fraud and waste
- Reduce subsidies to the private student loan industry
- Tax Big Energy's windfall profits to fund a rebate of up to $1,000 per family for heating costs
- Increase capital gains and dividends taxes for individuals making $200,000-plus or couples making $250,000-plus
- Cut capital gains taxes for small businesses
- Use tax breaks to induce companies to keep jobs and investments in America
- Streamline the tax filing system for families and seniors by consolidating tax credits
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