President's FY 2016 Budget
President Obama unveiled his nonbinding $3.99 trillion federal budget
to Congress for Fiscal Year 2016 on February 2, 2015. The overall
plan includes a mixture of revenue increases and
spending cuts. Also included are an ambitious public works program, a
one-time tax on foreign profits kept overseas by corporations, tax
credits for middle-class Americans, and a 1.3 percent pay raise for
federal employees and troops.
The President's budget proposal:
- Would use approximately $1.8 trillion in deficit-reducing measures to replace sequestration:
- $640 billion from taxes raised mostly by eliminating deductions without raising rates, including:
- Capping at 28% all itemized deductions, including the charitable deduction, for high-income earners
- Implementing the "Buffett Rule" by creating a new "Fair Share Tax:" 30% minimum effective tax rate for joint-filing taxpayers on income
in excess of $1 million Adjusted Gross Income (AGI).
- $400 billion in health care savings from Medicare, Medicaid and other health programs such as the Affordable Care Act
- $160 billion in higher income and Social Security taxes resulting from immigration reform
- Additional savings from lower interest costs on the federal debt
- Proposes to permanently set the estate tax at 2009 levels
Treatment of Charitable Deduction
President Obama's FY16 budget request again includes a provision to
cap at 28 percent the value of itemized deductions, including the charitable deduction, for high-income taxpayers. This marks the seventh consecutive budget that the president has proposed capping the
charitable deduction, which has never been adopted by Congress.
Analysis of the President’s Budget
- Independent Sector summary (IS member password required)
- Recording and slides from the February 13, 2015 Independent Sector digital workshop covering the details of the budget and its implications for the nonprofit sector (This content is available only to IS members or paid participants of this event.)
Tax Issues (IS member password required)
- Administration FY 2016 budget overview
- The Joint Committee on Taxation's report on the "Estimated Budget Effects of the Revenue Provisions Contained in the President’s Fiscal Year 2016 Budget Proposal"
- Congressional Budget Office report on "Updated Budget Projections: 2015 to 2025"
Obama's FY16 budget again proposes capping the rate at 28 percent
for which high-income earners may take itemized deductions, including
the charitable deduction
includes an increase in the top capital gains tax rate to 28 percent,
which would fall primarily on the richest one percent of Americans; sets
the estate tax
at 2009 levels; outlines numerous new or expanded tax breaks aimed at
the middle class; implements a one-time mandatory tax on corporate
foreign earnings; and seeks to lower the corporate federal income-tax
rate by closing loopholes.
Spending Items (IS member password required)
Obama’s FY16 budget of $3.99 trillion would fully reverse the
sequester and sets total discretionary spending at $1.091 billion. The
budget proposes increased funding for several education and
infrastructure-related initiatives, and includes: a public works program
for upgrading roads, railroads
and ports; an increase in research and development spending; a
“substantial investment” across the educational spectrum; and the
creation of a pilot project to allow for greater flexibility in the use of certain federal funding at the state and local level.
What's in the Federal Budget?
The budget consists of three primary components:
- Revenue – money coming in
- Spending – money going out
- Impact on the debt
Spending initiatives are then divided into three categories:
The Federal Budget Process in Practice
- Mandatory or entitlement spending
– for social safety net programs like Social Security, Medicaid,
assistance and food programs for needy families, and the State
Children's Health Insurance Program.
- Defense discretionary spending
– includes the salaries of soldiers and sailors, research and
development, and the acquisition of weapons, vehicles, and other
- Non-defense discretionary spending
– guides the operations of nearly every federal government agency and
program and largely determines how much federal assistance state and
local governments will receive. Spending categories include:
agriculture, education, housing, health and human services, the
environment, arts, and transportation.
In practice, each year varies -- Congress frequently modifies this
schedule when it is unable to agree on a joint budget resolution or
appropriations legislation. On the occasions when Congress and the
President have not agreed on all 12 appropriations bills, Congress must
pass a stop-gap measure, known as a continuing resolution, which
provides temporary funding for all of the departments, agencies, and
programs covered in the unfinished bills. Continuing resolutions can
last for only a few weeks -- in order to provide the House, Senate, and
President time to work out differences -- for the remainder of the
session of Congress, or longer.
The Federal Budget - Legislative Process
Legislative activity on the federal budget generally takes place between
the months of February and September, although spending and tax
priorities contained within a budget document are often determined well
before the president makes known his budget for the upcoming fiscal
On or by the first Monday in February, the President presents a
budget proposal to Congress after the state of the union. The
President's budget request includes proposed funding levels for
discretionary and mandatory programs and changes to the tax code, as
well as the level of deficit or surplus on which the government should
February through April
Taking into consideration the President's budget request and their
own priorities, the House and Senate Budget Committees each develop a
budget resolution outlining how much the government must spend according
to 19 broad categories or budget "functions," how much revenue the
government must collect, and the level of deficit or surplus on which
the government will run. In particular, the resolution determines the
total level of discretionary funding that will be available for the
upcoming fiscal year. The full Senate and House each approve their
respective resolutions, before meeting in conference to agree on a
single, joint resolution, which does not require the President's
April/May through Early Fall
The Appropriations Committees of each chamber consist of 12
subcommittees and set allocations for each one based on the budget
resolution. Following hearings, each Subcommittee drafts a bill
proposing spending levels for the programs and agencies under its
jurisdiction, adhering to the overall discretionary spending level set
by the budget resolution. After passage by the Subcommittee, the bill is
sent to the full Appropriations Committee for passage.
Summer through Early Fall
Following passage by the Appropriations Committee, the individual
appropriations bills are voted on separately in the House and Senate.
After passage by their respective chambers, the bills are sent to a
conference committee where the differences between the two chambers'
bills are resolved.
The budget is enacted after the President has signed each individual appropriations bill.
Access Presidential budget proposals from previous years: