Obama to Propose Higher Taxes


By James Freeman

The President wants to spend about $3.9 trillion next year, plus Team Obama has good news for Warren Buffett.


Details of Mr. Obama’s upcoming budget proposal are beginning to leak out and the word is to expect higher taxes on the wealthy, plus new spending programs. The Journal reports that his 2015 budget “will abandon overtures to Republicans and call for a large expansion in spending on education and job training, in a push certain to ratchet up tensions in the already-fractured capital ahead of November’s elections. The proposal—which will serve more as a political treatise than a fiscal blueprint—won’t include a call to slow the growth of Social Security spending by changing how the program accounts for inflation, White House officials said Thursday.”

Mr. Obama’s new spending plans “would be offset by spending cuts and tax increases on high-income earners.”

How high will spending go? The Journal’s Damian Paletta says that “last year the White House predicted it would call for total 2015 spending of $3.9 trillion, and total tax revenue of $3.3 trillion (so a deficit of roughly $600 billion). Look for something in that ballpark, though the deficit might be smaller, as the White House is expected to predict a pretty strong economy this year, which helps raise revenue.”

U.S. investors looking to relocate to the most taxpayer-friendly state in the country may not find too many appealing options. A new report from the Tax Foundation finds that “every U.S. state has a top marginal capital gains tax rate higher than the average of the 34 member countries of the Organization for Economic Cooperation and Development (OECD) of 18.2 percent.” Combining state, local and federal top marginal rates, the lowest top overall rate available anywhere in the U.S. is 25%. And it sails all the way up to 33% in California. A handy map shows the extent of the damage to investor portfolios.

Research shop Capital Alpha Partners reports that “oil & gas and railroad industries are reportedly close to a deal with the U.S. Department of Transportation on new operational standards. That likely means any mandate on retrofitting rail tank cars is years away.”
Capital Alpha adds that the “Obama administration has never been shy about new regulations carrying a significant economic cost. Indeed, a major theme of the administration has been the goal of increasing standards—safety, health, environmental—as far as the political consensus will permit. However, even they seem less than eager to to inflict the potential increase on energy prices that a major new safety mandate on rail tank cars could trigger.”

The upshot is that while the Keystone XL pipeline project still isn’t allowed to proceed, the other infrastructure for transporting oil—railroads—will avoid costly new regulations, at least for now. We’re all for avoiding costly new regulations. And in this case the uncharacteristic Beltway restraint is particularly helpful to President Obama’s pal Warren Buffett. The billionaire’s holding company Berkshire Hathaway owns a large railroad.

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