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Reports US

US stock market daily report (March 03, 2014, Monday)

March 4, 2014, Tuesday, 06:01 GMT | 01:01 EST | 10:31 IST | 13:01 SGT
Contributed by Millennium Traders

A proposal to pay for expansion of a popular tax credit for the working poor, will be released on Tuesday as President Barack Obama releases his 2015 budget plan in which he plans to eliminate tax breaks claimed by wealthy Americans.

The expansion of the Earned Income Tax Credit - one of the most popular U.S. government poverty reduction programs - is in the proposal. While the proposal would cost $60 billion, the amount is modest in a budget in which Obama has $1.014 trillion in spending to parcel out, per the White House. The proposed tax credit expansion would be paid for by closing the "carried interest" tax loopholes typically used by wealthy investors or employees of professional service companies such as law, consulting or lobbying firms. The "carried interest" tax loophole allows those financiers - many of whom are among the wealthiest people in the country - to treat such income as capital gains, making it subject to a tax rate of only 20%, instead of the nearly 40% on ordinary income paid by the highest earners.

The President's budget request is a mere two-tenths of a percent higher than his 2014 budget of $1.012 trillion because both amounts were set in a congressional budget deal in January.

The proposal will not only provide an agenda for Obama's fellow Democrats in a congressional election year, but will also help the President shift the debate to poverty reduction and middle-class betterment. Over the past three years, budget battles in Washington were dominated by deficit reduction. The proposal is an effort to shift the debate away from the dominated subject.

The "Gingrich" loophole - named after former Republican House Speaker Newt Gingrich - will also be targeted in the Presidents proposal. The controversial loophole allows certain self-employed individuals to avoid paying tax for the U.S. Social Security and Medicare programs. Gingrich was criticized for taking that tax break after he publicly released his personal tax filings during his run as Republican candidate for President in 2012.

By making contributions to workers' tax-protected retirement accounts automatic the President will try to use the budget to boost the middle class. Currently, workers must elect to have such contributions made to Individual Retirement Accounts. The switch proposed by Obama is expected to benefit nearly 13 million workers.

Despite the tight spending caps on his budget, Obama proposes to spend nearly $302 billion on highways, bridges and transit projects, to be paid for in part by ending some business tax breaks.