Congress Approves Obama Budget

by Mike Godfrey, Tax-News.com, Washington

06 April 2009

The United States Senate followed the House of Representatives on the evening of April 2 in passing the majority of President Obama's budget proposals for the fiscal year 2010.

The budget package, seen as a blueprint for Obama's economic policy going forward, was approved by 55 votes to 43 in the Senate. Shortly before, the House approved its version of the budget by a margin of 233-196. Both votes took place along party lines, with not a single Republican supporting the proposed measures.

The budget cuts USD1.8 trillion in taxes for middle-income taxpayers by extending the 2001 and 2003 income tax cuts for those making under USD250,000 per year. It also protects American families who would be hit with the alternative minimum tax in 2010. Among the tax reliefs included in the budget is an expansion of the Earned Income Tax Credit, which provides tax relief to millions of American families with three or more children. However, the plan also envisages the tightening up of the US tax code in respect of corporations, and seeks to reduce opportunities for corporate tax planning, particularly for multinationals who invest and maintain earnings overseas.

The budget also proposes unprecedented levels of spending on health, energy and job-creating initiatives, leading to warnings by fiscal conservatives that future generations will be picking up the tab for the current administration's spending spree. According to the Congressional Budget Office, cumulative federal deficits will be USD2.3 trillion higher than predicted by the White House from 2010 through 2019.

Obama, however, is of the belief that the budget lays the groundwork that will enable the deficit to be "cut in half" in four years.

"With this vote comes an obligation to pursue our efforts to go through the budget line-by-line, searching for additional savings," Obama stated in response to the House vote. "Like the families we serve, we must cut the things we don't need to invest in those we do."

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