The budget, released today in Washington, would bring back pre-2001 tax rates on income and capital gains for individuals earning more than $200,000 annually and married couples making more than $250,000. The estate tax would return to 2009 levels with a $3.5 million per-person exemption and a 45 percent top rate. Under a law Obama signed in December, lower rates expire at the end of 2012.


Obama is proposing an array of tax incentives. They include the elimination of capital gains on some small business stock, a permanent extension of the tax credit for business research and extension of a tuition tax credit. He is proposing to revive the Build America Bonds program, which expired at the end of 2010.

If one assumes taxes must be raised, then this is not too bad of a plan. Unfortunately, even if income taxes were raised to 100% on everyone (and that doing such a thing wouldn't kill the economy), we'd still be deeply in deficit.

The bottom line is that deep cuts in spending need to take place, not just tax increases (we are close to collecting as much in taxes as the private economy can yield anyways).

It also seems foolish to think we can afford to resume the Build America Bonds program, yet, that is in there as we have essentially become dependent upon it to prop up the municipal bond market.

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