Office of Management and Budget Director said ahead of President Obama's announcement that while the budget takes the necessary steps to "jumpstart job creation" and "strengthen the economic security of middle-class families," it does not shy away from making the "tough choices" needed to ensure fiscal discipline is maintained.

The White House is projecting a record federal deficit of USD1.56 trillion in 2010. However, one of Obama's key policy pledges is to halve the deficit he inherited from the George W. Bush administration by the end of his first term, and he has been fairly ruthless in wielding the cost cutting axe in this year's budget blueprint; more than 120 taxpayer-funded programs across government will be terminated or reduced, generating USD20bn in savings. The budget also institutes a three-year non-security discretionary freeze that will save USD250bn over the next decade.

The budget raises an additional USD36bn over the next decade by eliminating tax preferences and subsidies for producers of fossil fuels. In all, 12 tax breaks for oil, gas, and coal companies, will be eliminated. The White House says that this will not only further Obama's goal of encouraging higher investment in renewable energy production, but will also "encourage prompter action by the major emerging economies" to phase out their fossil fuel subsidies.

President Obama envisages that another USD122bn can be raised by tightening the rules surrounding corporate income made overseas. This echoes similar proposals contained in Obama's 2010 budget blueprint, but which have been relegated down his list of priories as Congress grapples with health care reform.

A document entitled "Restoring Responsibility," one of a multitude of fact sheets released alongside the budget, had this to say on the proposed reform of the taxation of international income: "The American corporate tax code is riddled with inefficiencies and loopholes, including the fact that it allows companies to indefinitely defer the payment of US taxes on foreign income while immediately benefiting from the tax deductions associated with these activities. It also allows many companies to take advantage of transfer pricing to shift income earned in the United States to lower-tax countries. The budget will reform and end these practices."

The budget also raises an extra USD90bn through the recently-proposed 'Financial Crisis Responsibility Fee,' to be imposed on the debt of the largest financial institutions, and a further USD14bn by making permanent the federal unemployment insurance surtax.

The budget will raise even more by letting the temporary tax cuts enacted in 2001 and 2003 expire for families making more than USD250,000 per year. These taxpayers will also have their itemized deduction write-offs reduced.

However, the 2011 budget is not unremittingly bleak for taxpayers, and additional tax breaks for small businesses and low- and middle-income Americans have been proposed. These include:

• An additional USD5bn to provide the Advanced Energy Manufacturing Tax Credit to many more advanced energy manufacturing projects.
• A permanent R&E Tax Credit
• An additional year of allowing companies (large and small) to immediately deduct 50% of their qualifying investments
• Extending enhanced small business expensing, allowing small businesses to immediately write off up to USD250,000 of qualified investment in 2010.
• Permanently eliminating capital gains tax on small business stock.
• Extending the Making Work Pay Tax Credit.
• Doubling the Child and Dependent Care Tax Credit for middle-class families making under USD85,000 a year by increasing their credit rate from 20% to 35% of child care expenses.

While the budget is non-binding on Congress, it lays the framework for tax and spending legislation over the next five years, and the House and Senate will seek to agree a budget resolution later this year.