Obama Uses Budget to Set Election-Year Priorities

WASHINGTON — In the last annual budget of his term, President Obama for the first time projects a deficit below $1 trillion and foresees the federal shortfall declining to sustainable levels by 2017.

To help reduce deficits and offset the costs of his proposed spending on job-creation initiatives for infrastructure, job-training and innovation, Mr. Obama uses his budget for fiscal year 2013 to call for raising $1.5 trillion over 10 years from the wealthiest taxpayers and from closing some corporate tax breaks, chiefly for oil and gas companies. For the first time he proposes a higher tax on dividend income of the wealthiest taxpayers, which would raise about $206 billion over 10 years. The budget proposal leaves him short of his goal to cut the deficit in half by 2013.

Later this month, the administration will propose an overhaul of the corporate tax code to root out many tax breaks and lower the 35 percent rate, but Mr. Obama is proposing that the change would not raise any more revenues than the current system, despite the nation’s chronic deficits.

Until now, Mr. Obama has proposed to keep the tax rate for dividends at 20 percent for the wealthiest 2 percent of taxpayers, which was the only exception to his effort to end the Bush-era tax cuts for those with taxable income above $250,000 a year. Now he calls for taxing dividends as ordinary income, which was the level that existed until the Bush administration; that would mean a 39.6 percent tax rate for dividends starting next year, though Republicans are certain to try to block the increase as they have the others that Mr. Obama has sought.

Yet the fight over the issue of taxing the wealthiest taxpayers plays to Mr. Obama’s election-year agenda, as does much of the budget, especially if his Republican opponent turns out to be Mitt Romney, the former Massachusetts governor whose personal fortune and acknowledged relatively low tax rate have had him on the defensive even in the Republican nomination contest.

The budget over all captures Mr. Obama’s effort to define the 2012 election not as a referendum on his record, which puts him on the defensive if unemployment does not continue to come down, but as a choice between his priorities and those of Republicans, who reject any higher taxes and want to sharply reduce the size of government and remake its most popular programs, Medicare and Medicaid.

Mr. Obama traveled to Northern Virginia Community College in Annandale, Va., near Washington on Monday to unveil his budget before a gymnasium packed with the sort of young voters his re-election campaign is courting. “Don’t worry, I will not read it to you,” he joked.

As he did in the State of the Union address last month, Mr. Obama framed the budget debate, for his part, as an effort to make sure “everyone plays by the same set of rules, from Washington to Wall Street to Main Street.” He rousingly promoted his initiatives to make college more affordable and train workers for health care, the sciences and advanced manufacturing. And he called for Warren Buffett and other wealthy Americans to pay an income tax rate no lower than secretaries pay.

“We don’t begrudge success in America,” Mr. Obama said. But, he added, “We do expect everybody to do their fair share, so that everybody has opportunity, not just some.”

Reflecting Mr. Obama’s more confrontational approach toward Republicans generally in an election year, after three years of what he has called their obstruction, the budget text that accompanied the nitty-gritty spending and revenue details included more partisan asides than past budgets.

For example, in alluding to Republicans’ blockage of much of his September package of job-creation and deficit-reduction measures — a package that is the basis of the new budget — Mr. Obama said that “unfortunately” Republicans had prevented much of it from becoming law “for the simple reason that they were unwilling to ask the wealthiest Americans to pay their fair share.”

The budget request for fiscal year 2013, which begins Oct. 1, projects tax and spending for a decade. For 2013, the budget forecasts that, allowing for Mr. Obama’s policies, total spending would be $3.8 trillion and revenues would total $2.9 trillion, leaving a deficit of $901 billion.

That compares to a projected $1.3 trillion deficit for this fiscal year through Sept. 30, when spending is expected to be slightly less than Mr. Obama proposes for 2013 but revenues would be significantly less — partly because of a still-fragile economy and partly because of the absence this year of the higher taxes on the wealthy and some corporations that Mr. Obama seeks for 2013 and beyond.

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