WASHINGTON — President Barack Obama sent Congress a record $4 trillion budget Monday that would boost taxes on higher-income Americans and corporations and eliminate tight federal spending caps to shower more money on both domestic and military programs. It would provide middle-class tax relief and fund an ambitious public works effort to rebuild aging roads and bridges.
Obama’s budget, which will set off months of wrangling in Congress, proposes spending $4 trillion — $3.999 trillion before rounding — in the 2016 budget year that begins Oct. 1. That’s a 6.4 percent increase over estimated spending this year, projecting that the deficit will decline to $474 billion.
In a message accompanying the massive budget books, Obama said his proposals are “practical, not partisan.” But even before the books were delivered, Republicans found plenty to criticize in the planned $2 trillion in tax hikes and increased revenue from immigration changes.
“The president is advocating more spending, more taxes and more debt,” said House Speaker John Boehner. “A proposal that never balances is not a serious plan for America’s fiscal future.”
Boehner and other GOP leaders said that the budget they produce this spring will achieve balance within 10 years, curb the explosive growth of government benefit programs and reform the loophole-cluttered tax code.
In a lengthy run-up to Monday’s budget release, the administration highlighted a number of its proposals, including $320 billion in increased taxes on the wealthy and corporations that would be used to pay for expanded middle class tax breaks.
The budget documents reveal that all the tax increases will total $2 trillion, including a number of proposalsObama has made before to limit deductions the wealthy can take to reduce their tax bill.
Wealthy people would only be able to take tax deductions at the 28 percent rate even if their income is taxed at 39.6 percent and would also see an increase in their maximum capital gains rate to 28 percent instead of 24.2 percent.
All told, Obama proposes higher receipts of about $2 trillion in his budget: about $1.5 trillion come from tax increases and almost $500 billion from fresh revenue as immigration changes lift the economy and provide new workers.
Among those benefiting from Obama’s proposed tax cuts would be couples earning up to $120,000 a year who would qualify for a new “second earner” credit of up to $500 as well as a maximum $3,000 child care credit for two children, triple the current $1,000.
Not all of Obama’s tax hikes would hit the wealthy. His budget also proposes to raise $95 billion over the next decade by hiking the tax on cigarettes from the current $1.01 per pack to $1.95.
Obama’s spending plan would ease tight budget constraints imposed on the military and domestic programs back in 2011 when lawmakers were responding to the public outcry over deficits that were then topping $1 trillion a year.
Obama’s budget calls these caps, known as sequestration, “mindless austerity.” The elimination of the budget caps this will boost spending by $74 billion — divided between the military and domestic programs — in 2016 and would result in a spending increase over the remaining six years the caps were to have been in place of $362 billion.
While many Republicans support easing the budget caps for the military, they oppose reducing the limits on domestic programs. Obama said Monday he would not accept a budget that boosts national security programs at the expense of domestic programs.
“It would be bad for our security and bad for our growth,” he said in a visit to the Homeland Security Department.
In a budget agreement reached in late 2013, the budget caps were eased but not eliminated for 2014 and 2015. They are to go back in force in 2016.
The administration said the budget represented a strategy to strengthen the middle class and help “hard-working families get ahead in a time of relentless economic and technological change.”
“This country’s better off than it was four years ago, but what we also know is that wages and incomes for middle class families are just now ticking up,” Obama said in an interview broadcast on Monday’s “Today Show” on NBC. “They haven’t been keeping pace over the last 30 years compared to, you know, corporate profits and what’s happening to folks in the very top.”
Republicans, however, accused the president of seeking to revert to tax-and-spend policies that will harm the economy while failing to do anything about the budget’s biggest problem — soaring spending on government benefit programs.
Obama’s budget projects a deficit of $583 billion in 2015, up significantly from last year’s $485 billion imbalance.Obama’s budget plan never reaches balance over the next decade and projects the deficit would rise to $687 billion in 2025.
The administration contends that various spending cuts and tax increases would trim the deficits by $1.8 trillion over the next decade, leaving the red ink at manageable levels.
Congressional Republicans say the budgets they produce will achieve balance and will attack costly benefit programs like Social Security, Medicare and Medicaid.
Obama, interviewed by NBC before the start of Sunday’s Super Bowl game, said he believed there were areas where he can work with Republicans, who for the first time in his presidency control both houses of Congress.
“My job is not to trim my sails and not tell the American people what we should be doing, pretending somehow we don’t need better roads, that we don’t need more affordable college,” Obama said.
Obama’s six-year $478 billion public works program would provide upgrades for the nation’s highways, bridges and transit systems, in an effort to tap into bipartisan support for spending on badly needed repairs.
Half of that money would come from a one-time mandatory tax on profits that U.S. companies have amassed overseas that would be set at 14 percent.
Obama’s budget also called also is calling for a $60 billion program for free community college for an estimated 9 million students if all states participate. It also proposes expanding child care to more than 1.1 million additional children under the age of 4 by 2025 and seeks to implement universal pre-school.
Obama also wants to require estates to pay capital gains taxes on securities at the time they are inherited. He also is trying to impose a 0.07 percent fee on the roughly 100 U.S. financial companies with assets of more than $50 billion.
Highlights of proposals in the $4 trillion budget for 2016 that President Barack Obama sends to Congress on Monday:
—A six-year, $478 billion public works program for highway, bridge and transit upgrades. About $238 billion would come from a one-time 14 percent mandatory tax on the up to $2 trillion in estimated U.S. corporate earnings that have accumulated overseas. That rate is significantly lower than the current top corporate rate of 35 percent. The top corporate rate for U.S. earnings would drop to 28 percent; foreign profits would be taxed at 19 percent, with companies getting a credit for foreign taxes paid. The remaining $240 billion would come from the federal Highway Trust Fund, which is financed with a gasoline tax.
—Increasing the capital gains rate on couples making more than $500,000 per year, from 23.8 percent to 28 percent. Obama wants to require estates to pay capital gains taxes on securities at the time they are inherited. He is trying to impose a 0.07 percent fee on the roughly 100 U.S. financial companies with assets of more than $50 billion.
—Obama would take the $320 billion that those tax increases would generate over 10 years and funnel them into low- and middle-class tax breaks. His ideas: a credit of up to $500 for two-income families, a boost in the child care tax credit to up to $3,000 per child under age 5, and overhauling breaks that help pay for college.
—Easing painful, automatic cuts to the Pentagon and domestic agencies with a 7 percent increase in annual appropriations. For 2016, he wants a $38 billion increase for the Pentagon.
—The projected budget deficit would be $474 billion, slightly higher than the $467 billion forecast by the Congressional Budget Office for 2016. For the budget year that ended Sept. 30, the actual deficit was $483 billion. That was a marked improvement from the $1 trillion-plus deficits during Obama’s first years in office, when the country was struggling to emerge from a deep recession.