EconomistMom makes an important point about the deficit: a significant part of it is attributable to Obama's planned continuation of most of the 2001 and 2003 tax cuts. She writes:
So the biggest single proposal in the Obama budget contributing to the deterioration in the 10-year budget outlook is, contrary to public perception, not big spending on bailouts or stimulus or even longer-term health care reform, and not temporary tax cuts that are designed to provide immediate stimulus to the economy at only near-term cost, but rather permanent extension of most of the Bush (2001 and 2003) tax cuts–with costs that grow dramatically over time. It explains why the Obama budget (according to CBO projections) will not only fail to make trillion-dollar-plus deficits an extraordinary and temporary phenomenon (with the 2019 deficit climbing back to $1.2 trillion), but will fail to stabilize the public debt as a share of GDP (with the ratio exceeding 80 percent by 2019).
President Obama doesn’t have to feel “stuck with” the Bush tax cuts. In fact, Congress will have to write and pass new legislation, which President Obama will have to sign, in order to keep any of the “Bush tax cuts” beyond December 31, 2010. So now that they’re so clearly a central part of the Obama budget, it’s probably time we stop calling them the “Bush tax cuts” and start calling them the ($2 trillion in deficit-financed) “Obama tax cuts.” But we’re still not “stuck with” them.
Under current law, income tax rates would revert to their pre-2001 levels in 2011. The 10% would be folded back into the 15% bracket, the marginal rates on the current 25%, 28% and 33% brackets would rise to 28%, 31% and 36% respectively, and the top rate goes up to 39.6%. While the administration proposes letting the rates rise as scheduled on incomes over $250,ooo, it would make permanent the rest of the current bracket structure, and add a number of other breaks that would apply mainly to low- and middle-income households.
One purpose of the administration's tax proposals is to lean against the trend of widening income inequality and stagnating middle-class incomes by raising taxes on the rich and cutting them for the middle class. In doing so, they seem to have taken a very narrow definition of rich: median US household income is roughly $50,000, so the administration is only allowing income taxes to rise on households making more than 5 times the median (this is a conservative calculation, since "taxable income" is considerably less than income). The administration is also making permanent the "patch" of the alternative minimum tax, which also mainly benefits households that are relatively well-to-do (if not truly wealthy). Moreover, even though incomes have ballooned at the very, very top of the distribution, the administration is not proposing a still higher rate on multimillion-dollar income levels.
Not really soaking the rich, just moistening them a bit...
Update: See also Howard Gleckman's summary of the Tax Policy Center's examination of the tax side of the Obama budget.