Obama to unveil $4-trillion budget

The White House is to unveil a sweeping $3.99-trillion (3.52-trillion-euro) budget for the coming fiscal year, which seeks to boost the middle class, revamp the country's crumbling infrastructure and beef up security at home and abroad. But the proposal is sure to be dead on arrival at the Republican-controlled Congress, as President Barack Obama looks to tax hikes for funding his progressive agenda.

'Robin hood' tax plan

Spending for the six-year $478-billion public works program would be offset by a one-time 14 percent mandatory tax rate on an estimated $2 trillion of untaxed earnings piled up by US companies, such as General Electric and Apple, overseas. This would generate nearly $240 billion, according to White House calculations.

The 2016 spending blueprint also foresees a 19-percent tax on American firms' future foreign profits. Under current laws, profits made abroad are only subject to federal taxes if they are returned, or repatriated, to the US, which has led many companies to set up subsidiaries overseas, which double as "parking lots" for their accumulated wealth.

"The reformed system would close loopholes that allow US companies to shift profits to tax havens and avoid paying tax on them for years or forever," said a White House official.

A tax hike on the wealthy and on trust funds would help raise $320 billion, in return for tax credits for low- and middle-income families, as well as a $60-billion program for free community college and an $80-billion child care initiative. Another centerpiece of Obama's tax reform would increase the capital gains rate from 23.8 percent to 28 percent.

More gridlock?

The White House said the plan would "put the good of middle-class families and our economy front and center, while also continuing progress on restoring fiscal discipline."

"You don't have to choose between those two things," one senior official argued.

But Republicans have spent the days and weeks leading up to Monday's announcement, shooting down any hopes that Obama will get his way.

"When [the President] devotes his time and energy to talking about the new tax-and-spend policies that progressives like and Republicans universally oppose, he signals to Congress that he is once again looking to argue rather than to legislate," said Keith Hennessey, an economic adviser to former Republican President George W. Bush.

Still, the White House argues, the budget contains many proposals Republicans should support. "Our hope is that by laying out…a clear economic vision centered around the middle class and economic growth, that we'll be able to have a productive conversation (with Republicans) and make progress over the course of the year," a hopeful administration official said, previewing the budget's release.

Common ground?

Among such proposals are $14 billion to beef up the country's cybersecurity defences, a 7-percent rise in domestic and military spending, a 6-percent increase in research and development and a controversial consolidation of US agencies. Other proposals include spending to "counter Russian aggression in eastern Europe," said a senior administration official, as well as added funds to help defeat the Islamic State militant group.

The White House budget projects a $474 billion deficit, or 2.5 percent of the country's GDP, estimating that deficits will stabilize at that rate over a 10-year period. It also assumes that the world's largest economy will grow at about 3.1 percent this calendar year, ending in October, with unemployment dropping to 5.4 percent from the current rate of 5.6 percent and inflation increasing to 1.4 percent from 0.76 percent in 2014.

pad/hg (AP, AFP, Reuters)