President Obama has released his FY 2014 budget proposal. The budget includes $1.8 trillion of deficit reduction proposals, with $580 billion in additional revenue "from tax reform that closes tax loopholes and reduces tax benefits for those who need them least." The budget proposals also include cuts to Medicare and changes to the inflation adjustment for spending programs and tax provisions. The President has explicitly linked the spending cuts and the tax increases in an effort to achieve the so-called "grand bargain" of deficit reduction. If such a bargain is to be achieved, it will probably come this summer as part of the negotiations to increase the debt limit.

Among the proposals to reduce "tax benefits for those who need them the least", the President has again proposed to limit to 28 percent the benefit of certain tax preferences, including tax-exempt interest. However, last year's proposal only applied the limitation to families with AGI greater than $250,000. This year's proposal does not appear to have any such limit.

The President has also proposed a new direct-pay bond program. The program is called America Fast Forward (AFF), and the permissible uses of the bonds include nearly all of the current uses of tax-exempt bonds, such as private activity bonds and short-term capital needs. For more details, please click here.