Two months later than required by law, President Obama submitted his federal budget proposal for fiscal year 2014 on April 10. That proposal, as required, included a 10-year budget projection. I wrote in some detail about Obama’s record-large budget proposal in last week’s E-Letter.
Now that analysts have had a few days to drill down into Obama’s 10-year budget forecast, we are learning some really surprising facts. According to an analysis released by the nonpartisan Tax Policy Center in Washington on Monday, the top 1% of US taxpayers would pay 67% of the higher taxes called for near the end of President Barack Obama’s latest 10-year proposal.
You may recall that Obama’s new budget would raise various taxes by more than $1 trillion over the next decade, and that money has to come from somewhere. If Obama’s budget is approved, almost all of that tax increase would come from the “rich.” No surprise there, really.
According to the Tax Policy Center, households making between $500,000 and $1 million would pay an average of $13,474 in higher federal taxes by 2023. That means that those households would be paying more than two-thirds of all new federal tax increases proposed in Obama’s new 10-year budget!
Households making more than $1 million a year would be paying even more. Top earners would be subject to a minimum tax rate of 30%, limits on their deductions and an increase in the estate tax rate from 40% to 45%.
That compares to households earning $30,000 – $40,000 that would pay an average of only $54 more in federal taxes if Obama’s budget is approved.
As this new study from the Tax Policy Center was making the rounds in the media over the last several days, some took it to mean that the tax bracket for those making $500,000 to $1 million or more would rise to 67%. That is not what the study is saying. Rather, it is merely pointing out that 67% of the new federal tax increases included in Obama’s 10-year budget proposal would be paid by the top 1% of taxpayers.
The good news, possibly, is that Obama’s 10-year budget proposal appears to have almost zero chance of passing either the House or the Senate. Even if it were passed, Obama is only in office until 2016. Future presidents always change the budget proposals, for better or worse.
While Obama’s latest 10-year budget proposal is not likely to be passed into law, it does give us a picture of where the Democrat Party intends to go over time: radically higher tax rates on top wage earners. What else is new?
Unfortunately, recent trends in demographics paint an increasingly alarming picture for the Republican Party in the years to come. But that is a lengthy discussion I’ll have to save for an upcoming E-Letter, which I am not looking forward to writing.
But just to give you a hint, here’s what the Democrats are salivating over – an article this week from the left-leaning POLITICO (warning to conservatives – this is tough to read).
Lunch/Seminar With Hanlon Investment Management
We are hosting a lunch seminar in Austin on May 8th featuring Hanlon Investment Management, a Registered Investment Advisor managing apprx. $3.5 billion in assets. As I noted in my January 8 E-Letter, Hanlon’s Managed Income Strategy is an innovative approach with the potential to increase your returns with an eye on capital preservation.
If you live in the Austin area, or will be in Austin on May 8th, call Joanne at 800-348-3601 to reserve your spot. The lunch seminar will be at the Westin Hotel in The Domain at 11:30 AM. This is also an opportunity for me to meet you personally – I always love to meet my readers and clients. Seating to this event is limited, so I urge those in the Austin area to reserve your spot as soon as possible. I hope to meet some of you there.
Have a great weekend everyone!