The $1.8 trillion in deficit cuts would replace the “sequester,” cancelling those automatic budget cuts that are now affecting agencies ranging from the Defense Department to the Federal Aviation Administration. Instead, the budget savings would come largely from tax hikes and entitlement reforms, and a related easing of interest payments on national debt.
The Obama administration says its plan would bring the federal deficit down to 2.8 percent of gross domestic product in 2016 and 1.7 percent of GDP in 2023.
But overall, the national debt as a share of GDP would be little changed, falling from about 76 percent today to 73 percent in 2023. That contrasts with a House Republican budget that seeks to bring the budget into balance and debt down to 55 percent of GDP by 2023.
For all the debate about taxes, the key difference between the two budget visions is on spending. Where Obama would spend $3.78 trillion in 2014 and $46.5 trillion over the next decade, House Republicans would like to see $3.53 trillion and $41.5 trillion, respectively. The two sides are not nearly as far apart on tax revenue, with a gap between their plans of about $1 trillion for the next decade.
2. New taxes: $580 billion.
As with prior Obama tax hikes, the focus here is on raising revenue from upper-income households.
First, the president calls for a “Buffett rule,” to ensure that households with incomes higher than $1 million (business tycoon Warren Buffett is safely ensconced that category) pay at least 30 percent of their income (after charitable giving) in taxes.
Second, Obama seeks to limit the value of tax deductions for the top 2 percent of earners to 28 percent of taxable income.