Obama’s 2015 Budget Riles Up Retirement Industry

Under the budget proposal, workers earning more than $250,000 would have to pay tax on contributions in the year the contributions are made, and then pay tax at the full rate when contributions are distributed at retirement, Graff said. "This amounts to a penalty for saving through a 401(k) plan. Who could blame a small-business owner for thinking that if the government is going to penalize them for saving in a retirement plan, maybe they should not have that plan?"

Obama also said that his budget "gives millions more workers the opportunity to take advantage of the tax credit," paying for this "by closing loopholes like the ones that let wealthy individuals classify themselves as a small business to avoid paying their fair share of taxes."

The budget would also eliminate a provision used by hedge funds and private-equity firms to treat income from managed investments, known as carried interest, as capital gains, as opposed to ordinary income.

Obama said during his Tuesday comments that at a time when the nation's "deficits have been cut in half," his budget plan "allows us to meet our obligations to future generations without leaving them a mountain of debt," and "adheres to the spending levels that both parties in both houses of Congress already agreed to." But Sen. Orrin Hatch, R-Utah, ranking member on the Senate Finance Committee, chided Obama's plan for being "a full month late," and a recycled version of "the same old spending surges, tax hikes and budgetary smoke and mirrors that have repeatedly failed to right the nation's economic ship."

Said Hatch: "Instead of embracing fiscal responsibility, this budget increases government spending by $791 billion over the next 10 years. Instead of tackling the nation's sky-high debt, which has already exploded by a whopping $6.8 trillion under this White House, this budget slaps on an additional $8.3 trillion over the next decade and fails to include any substantial reforms to the greatest drivers of our debt — Medicare, Medicaid and Social Security."

Indeed, political strategist Greg Valliere of Potomac Research opined Tuesday that because "the White House needs to keep Democrats motivated for the fall election," the budget will not mention entitlement reform.

Obama's budget did, however, abandon the idea of a "chained" consumer price index that would slightly reduce Social Security cost of living adjustments (COLAs). As Valliere notes, "Congress earlier this year caved in on a modest COLA reduction for military retirees — confirming that no one in this city dares to touch the issue, even though it will demand attention later this decade."