Obama $3.8 Billion Budget Keys on Jobs, Deficit Trimming
President Barack Obama on Feb. 1 unveiled a $3.8 trillion fiscal 2011 budget that seeks to create jobs in the near term through additional stimulus spending and reduce the deficit by imposing nearly $1 trillion in higher taxes and fees over the next decade on households earning more than $250,000.
To spur job growth, Obama is seeking $100 billion in additional tax cuts and public works spending right away, including a $33 billion tax cut in a new jobs bill that would give firms a $5,000 tax credit for each new worker they hire this year. Businesses that increase wages or hours for their current workers in 2010 would be reimbursed for the extra Social Security payroll taxes they would pay. The tax credit would not apply to jobs paying more than $106,800. Obama also proposes to eliminate capital gains taxes on new investments for small businesses and extend through 2010 a provision that allows small businesses to write off in the first year up to $250,000 in equipment investments.
Obama has also proposed to include a rebate for those who retrofit their homes, a plan that is gaining traction on Capitol Hill.
NAHB this month sent a letter to Senate leaders urging them to support the comprehensive home energy retrofit program being developed as part of pending job creation legislation. The letter stated that this program has the potential to “create thousands of jobs for home builders, remodelers and contractors” and will improve energy efficiency in the existing housing stock. NAHB also emphasized the importance of enacting a program that includes all qualified, properly-trained contractors who have access to diverse training and certification options, such as those offered by the Home Builders Institute.
Of concern to the housing community, part of the White House plan to produce a decade-long reduction in the deficit from $1.6 trillion this year would be to limit the mortgage interest deduction, real estate tax deductions and all other itemized deductions for couples making over $250,000 and single taxpayers earning more than $200,000. Those in the highest tax brackets would, in effect, be able to deduct only 28% of these expenses, instead of a percentage equal to their top marginal tax rate. The plan also seeks to tax carried interest as ordinary income, which could have a significant impact on the multifamily and commercial real estate sectors at a time when they are already experiencing a severe downswing.
It’s important to note that no White House budget is ever approved “as is” by the Congress. In fact, the proposals to limit the itemized tax deductions for high earners and raise the tax rate on carried interest were included in the President’s budget from last year and received a chilly reception on Capitol Hill. NAHB will work to ensure that they are once again stripped from a final budget plan to emerge from Congress.
Meanwhile, the NAHB staff continues to analyze the massive 1,000-plus page budget proposal and is in the process of preparing a more detailed analysis.
Obama is expected to send Congress a complete budget plan in April and Congress is not likely to approve the fiscal year 2011 budget until later in the year. Given the size, cost, complexities and major policy overhauls that this blueprint entails, the budget battle in the weeks and months ahead is likely to be contentious as lawmakers on both sides of the aisle debate its merits on an array of fronts — from taxes, to energy policy to social spending.
Adding a new wrinkle to the budget debate, the House and Senate have each approved statutory pay-as-you-go rules that seek to control deficit spending by requiring that all new legislative tax cuts and increases in entitlement spending be offset by cutting spending or increasing revenue elsewhere in the budget.
NAHB will remain deeply engaged as the budget process moves forward, fighting to strip out any provisions that will harm housing and promoting elements that will help small businesses and the housing sector.
For more information on the budget, e-mail Jenna Hamilton at NAHB, or call her at 800-368-5242 x8407.