Obama’s Budget: A Handy Guide to Remodeled Priorities

President Obama’s budget, released last week and downloadable here, is almost ten times shorter than the economic recovery law passed last month, but it packs just as big an ideological punch as the stimulus.

Both the presidential and congressional budgets set frameworks for future spending without instituting binding new policies, but the dense documents are considered important “statements of priorities” for the party in power. In the case of Obama and his Democrats, one priority emerges most clearly from the budget: spreading wealth around for the common good (apologies for the Joe the Plumber reference).The budget proposes to spend $3.55 trillion next year, or slightly more than one-fifth of the nation’s GDP. Republicans are livid over what they bill as the budget’s wildly out-of-control spending, yet most of the items swelling next year’s projected deficit to $1.1 trillion were the product of the Bush years — think tax cuts and the Iraq war, which is reflected in the new White House budget for the first time ever.

The GOP’s other major attack line on the budget is a familiar one: it includes $1 trillion in new taxes. Yes, but take a look at who’s getting their taxes raised and their subsidies yanked.

$338 billion would be raised by allowing the Bush-era tax cuts to expire for couples making more than $250,000 per year. That means that wealthy families’ income above that level would be taxed at 39.6% rather than 35% — so if your household makes $250,100, only $100 would be taxed at the higher rate. That doesn’t sound so bad, does it?

$180 billion would be raised by limiting wealthy taxpayers’ ability to claim itemized deductions limited above $250,000 of income. One former GOP tax aide has predicted that Congress will kill this proposal out of concern that it would hit both charities (by shrinking the non-profit giving deduction rate) and the real-estate market (by shrinking the mortgage-interest deduction rate). But if targeted exemptions are built in, there’s no reason why the provision shouldn’t survive.

$17 billion would be raised by reinstating taxes on companies that help generate Superfund toxic-waste sites by dumping chemicals. It wouldn’t happen right away, but it would create incentive for polluters to stop acting with impunity.

$4 billion would be raised by eliminating subsidies aimed at enticing private banks into the student loan market. Private loans often come at a greater cost to the borrower and the government when compared with direct public lending.

$32 billion would be raised by eliminating tax breaks for oil and gas companies, including the controversial “royalty relief” provision that allowed Big Oil to make a windfall off of exploration in the Gulf of Mexico.

$24 billion will be raised by eliminating the “carried interest” tax break that allows hedge fund managers and other private equity kingpins to claim a 15% tax cut on their earnings, rather than the usual 35% rate. It remains to be seen whether Obama’s fellow Democrats will go along with this one.

Health care and climate change are also given their due in Obama’s budget. But these taxation provisions — along with beneficial breaks, such as a permanent extension of the R&D tax credit — reflect a sweeping shift in attention towards enriching middle- and lower-income Americans. And if that enrichment costs the wealthy a little more, well … too bad. As Speaker Pelosi put it, “We won the election.”