The Free Press, Mankato, MN

State, national news

March 1, 2014

For Obama, an election-year budget without drama

(Continued)

The plan would renew Obama's call for universal preschool, which he has proposed paying for with a cigarette tax. It would expand job training programs, create manufacturing institutes and help states reduce energy consumption.

Obama's proposal to increase spending on defense would be contingent on increasing domestic spending as well, in a move designed to put pressure on defense-minded Republicans.

Defense Secretary Chuck Hagel said the extra dollars, which would restore some money trimmed through automatic spending cuts known as the sequester, would permit the Pentagon to increase training, improve aircraft and weapons systems and repair military facilities.

"Continued sequestration cuts would compromise our national security both for the short- and long-term," Hagel said.

Obama will recommend tax changes that would generate billions in revenues to help pay for those initiatives.

His tax proposals include efforts to curtail what the administration views as tax avoidance schemes by U.S. companies with business overseas or by foreign-owned companies with operations in the United States.

One proposal would seek to limit the ability of companies to take advantage of differences in tax rules from country to country, administration officials said. A second would restrict the ability of multinational corporations to assign much of their debt to U.S. operations in order to take advantage of U.S. interest deductions. A third would classify as taxable the income from certain digital transactions that have been able to escape U.S. taxation.

The proposals are part of an international effort by leading economies to limit tax avoidance by multinational companies. Administration officials said the proposals in the budget would raise several billion a year and could be part of a broader tax overhaul that would be used to reduce corporate tax rates.

But Congress probably will not tackle such a massive task this year. After the leading Republican tax writer in the House came out with a detailed plan to change the tax system, Boehner made no commitments to take it up.

He said the proposal by the chairman of the House Ways and Means Committee, Rep. Dave Camp, R-Mich., had allowed a "conversation" to begin on overhauling tax laws.

"That will advise us on if and when and how we move forward," he said.

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