Obama’s Budget Proposal: The Good, The Bad And The Ugly
As Obama edges his way into his golden years as President of the United States, one can reasonably compare him to an aging grandparent or great-uncle.
First, he clearly does not give a damn anymore, as evidenced his by impromptu comments during the State of the Union address.
Much like my grandpa in his late years, Obama appears to have lost patience with most of his extended family -- Congress, the Senate and, sometimes, even the American people.
But, despite all of this, he still has a few good ideas worth passing down.
Here are some of the good, bad and ugly components of President Obama's budget proposal.
(Author’s note: I consider myself to be pretty middle-of-the-road/slightly libertarian in my political views, so both sides may agree with me or hate me. Jury’s still out.)
1. Good: One-time tax on foreign profits kept overseas by corporations
When most of us Americans do our taxes in the spring, we are required to disclose any foreign investments or funds. This prevents me (as an average person) from driving over to Canada, opening a savings account and stashing all my funds there so the US government doesn’t know about them.
Corporations should be held to the same standard. According to the Washington Post, this would be:
[a] one-time mandatory 14 percent tax on about $2 trillion in profits that corporations have been keeping overseas in order to avoid corporate income taxes here. The tax would be a sizable hit on multinationals and a way of discouraging them from parking money in foreign countries.
However, the fact that he wants the money almost immediately isn’t fair for the companies, as they became somewhat accustomed to the current dynamics — dynamics set in place (at least in part) by prior US legislation.
There is also some debate about whether or not 14 percent is too steep.
2. Bad: Inheritance taxes
Under his plan, if someone inherited money through an estate, he or she would be required to pay taxes immediately.
Private money in private families should not be subjected to additional taxation than what is currently required.
3. Bad: Ending the college savings tax break for upper-middle-class Americans
Under his plan, households with incomes of $200,000 a year would be punished for saving for their children’s college.
While $200,000 might seem like a high number to the average young, single person, in reality, it does not make a family “excessively wealthy” by any stretch of the imagination.
Obama would do well to remember that by giving families a small break on savings, it creates fewer students who need financial assistance for college later on.
4. Good/Bad: Quality preschool for all
Right now, poor people get to send their children to preschool for free, while middle and upper-class Americans have to pay exorbitant rates.
According to the National Association of Child Care Resource & Referral Agencies (NACCRRA),
Depending on where you live and the quality of the preschool, average costs range from $4,460 to $13,158 per year.
If Obama wants to make quality preschool accessible (read: free) for low-income families, he must extend the same courtesy to all American children. Rolling preschool into the public education system would also give it at least some modicum of accountability.
Additionally, even though I am not a parent, I believe small children should receive every opportunity possible and not be punished for their parents’ financial situations.
However, this still begs the question as to how it should be paid for (more on that later).
5. Good: Tax relief for small businesses
By simplifying the tax depreciation measures and adjusting the deduction limit for inflation, small business owners will catch a bit of a break, and in turn, hopefully be able to hire more workers and grow their businesses, thus stimulating local economies.
6. Good: Tax breaks for “green” homes and businesses
This is a classic example of “nudge theory” at work. Few people like the government telling them what to do, but by offering small tax breaks to individuals and businesses who engage in environmentally-friendly practices, the government is motivating with a carrot rather than a stick.
7. Very Bad: Expanded EITC and child care tax credit
These are two of the most discriminatory tax practices in the United States, as they clearly punish low-income, childless individuals and couples who choose to not have children. If you’re a childless adult who makes less than $48,800 per year, a look at the EITC table will get your blood boiling.
For example, a childfree couple with a combined income of $27,200 per year will receive no additional money back on their income taxes; whereas, a single mother with three children who makes that same amount will receive $4,164 back at tax time (in addition to any credit she might receive from the child care credit).
Keep in mind that child support and other welfare benefits (free housing, SNAP, cash assistance, etc.) do not enter into the equation when calculating annual income, and it becomes even less fair. (This EITC is in addition to the extra tax credits people with children already receive.)
While Obama’s budget does increase some of the income limits for childfree couples to receive EITC, it is still based on the number of children and, therefore, remains discriminatory toward those who don't have children.
Most importantly, Obama does not offer any real long-term solutions for cutting spending to fund his many ambitious projects (light rails, better roads, free college, etc.).
Even if we took all of the wealth from the richest 1 percent right now, it would still just be a short-term solution.
The solution must be two-fold: It must hold corporations to the same standards as small businesses with regard to paying taxes, but at the same time, it must encourage personal responsibility and accountability.
As he enters his golden years, Obama must be the kind of grandparent who shows his wayward “children” some tough love by refusing to pay for their irresponsibility and poor life decisions.
America must work toward phasing people off of welfare by slowly replacing it with “workfare” and eliminating tax breaks for people who have children they cannot afford. We simply cannot afford to become a welfare state – our family simply doesn’t have that kind of money.