By Erik Wasson - 03/05/14 10:42 AM EST
Stock market surge helps Obama budget pay for new spending
The outstanding stock market gains of 2013 have given President Obama a boost in his quest to pay for $56 billion in new stimulus spending next year.
The largest offset for this new spending in 2015 is a limit on the amount of money that can accrue in 401(k) retirement accounts without being taxed. Obama says that will generate $28 billion.
Obama has proposed this accrual limit in the past, but the revenue generated was much less. Last year, the Obama budget got $9.3 billion over 10 years from the same provision. The Joint Committee on Taxation said it would raise $3.8 billion.
Asked about the change, an administration official said new data and the bull market in stocks accounts for the change.
The benchmark Standard & Poor’s 500 index rose 30 percent last year, hitting an all time high for the first time since 1999.
“The data indicated larger account balances in some accounts than we had previously thought. In addition, we had about a 30 percent increase in the stock market last year, which pushed up account balances across the board,” an official said.
The Obama budget proposes to cap the total value of tax-preferred retirement accounts at $3.4 million in total value, enough to pay for an annuity of $200,000 per year in spending during the average retirement. Account values above the cap would be taxed.
The new jobs spending in the budget is also paid for by cuts to crop insurance subsidies, to the tune of $14 billion.