President Barack Obama is expected to release his budget proposal this week, and he reportedly plans to include tax increases to close the deficit.

Despite the $787 billion stimulus bill he signed into law last Tuesday, and the $275 billion housing rescue plan he outlined last Wednesday, Obama is aiming to cut the current budget deficit in half by the end of his term, according to The New York Times. He hopes to reduce the deficit from the current level of $1.3 trillion for fiscal 2009 to $533 billion for fiscal 2013. In part, the plan will depend on allowing the Bush tax cuts for those making more than $250,000 per year to expire after 2010.

Obama is also expected to call for increasing taxes on the investment income earned by hedge fund managers and private equity firm partners, which is currently taxed at capital gains rates of 15 percent. The administration plans to call for taxing the earnings as ordinary income, which currently tops out at a 35 percent rate and would rise to 39.6 percent once the Bush tax cuts expire. The capital gains tax rate would rise to 20 percent when the Bush tax cuts expire.

“It will require all we can to get the exploding deficits under control as our economy begins to recover,” Obama said in his weekly radio and Internet address on Saturday. He convened a Fiscal Responsibility Summit at the White House on Monday to get advice on ways to reduce the deficit. At the summit, he said the federal budget would avoid "accounting tricks" such as leaving the costs of the Iraq war and the patch for the alternative minimum tax off the main budget.

Obama also reportedly hopes to slash the deficit by withdrawing U.S. troops from Iraq, cutting subsidies to insurance companies that participate in the Medicare Advantage program when seniors can buy the same coverage from the government, reducing spending on private contractors, and raising revenue from a cap-and-trade system to control greenhouse gas emissions. Obama is expected to outline some of these plans at his first address to a joint session of Congress on Tuesday evening.

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