[Editor’s note: In an effort to help inform our members about state and federal budget issues, Minnesota Environmental Partnership is working with the Minnesota Budget Project to cross-post updates about the budget.]
President Obama’s proposed budget for Fiscal Year 2012 represents a good-faith effort to take a balanced approach to deficit reduction by proposing a mix of significant spending cuts, some increased investments as well as raising revenues by allowing high-income tax cuts to expire as scheduled in 2012 and closing numerous tax loopholes.
The fact that the President’s budget includes a mix of both spending cuts along with increased revenue is noteworthy, given the increasingly polarized political climate in Congress, where many members advocate drastic reductions in spending but refuse to consider new revenue. The President’s balanced approach makes more sense because it recognizes the vital role that some federal spending has in protecting the still-fragile economic recovery
Some key proposals in the President’s budget include:
-Freezing overall funding for non-security discretionary programs for five years, saving $400 billion over ten years (including a deep 50 percent cut in community services block grants and the Low-Income Home Energy Assistance Program (LIHEAP).
-Cutting $78 billion in defense spending over the next five years.
-Preventing $950 billion in additional deficits by allowing the 2001 and 2003 tax cuts for households with incomes over $250,000 to expire as scheduled after 2012, and restoring the federal estate tax at the 2009 parameters. Under these parameters, the assets of 99.75 percent of Americans who died in 2009 were exempt from the estate tax.
-Capping itemized deductions at 28 percent and using the savings to pay for the extension of relief from the Alternative Minimum Tax (AMT) for three years. (Previously, extended AMT relief has not been paid for, thereby adding to deficits).