Obama's Latest Tax Proposals for 2013
The Obama Administration's 2013 tax reform plan proposes making dozens of changes to the tax laws, including closing or reducing many tax loopholes and cherished deductions.
Just about everyone agrees that the tax system in the United States must be reformed. There is little agreement, however, on how to go about it. The Obama Administration has its own ideas and has set forth a highly detailed plan for tax reform in its 2013 proposed budget. The plan makes dozens of changes to the tax laws. It raises an additional $600 billion in revenue over the next ten years by closing or reducing many tax loopholes and cherished deductions. Yet it also cuts the tax rates on corporations--something Republicans have been demanding. In addition, the budget includes breaks for businesses to encourage creation of new jobs and tax incentives for infrastructure development and clean energy.
Some of the most important provisions in the plan include:
- limiting the value of individual itemized income tax deductions to 28% for taxpayers the top three tax brackets ($529.3 billion tax increase over ten years)
- replacing the current Consumer Price Index (CPI) with the chained CPI when adjusting tax brackets for inflation--effectively raising income taxes by placing some taxpayers into higher brackets ($100.0 billion tax increase)
- raising the estate tax rate to 45% and reducing the estate tax exclusion to $3.5 million ($71.7 billion tax increase)
- enacting a financial crisis responsibility fee ($59.3 billion)
- increasing tobacco taxes and indexing them to inflation ($78.1 billion tax increase)
- enacting the "Buffet Rule:" a 30% minimum tax on individuals with adjusted gross incomes above $500,000 ($53.4 billion tax increase)
- imposing a $3.4 million ceiling on retirement accounts ($9.3 billion tax increase)
- extending increased Section 179 expensing for small businesses ($68.7 billion tax cut)
- permanently extending increased refundability of the child tax credit ($51.5 billion tax cut)
- enacting a temporary 10% small business tax cut for new jobs and wage increases ($25.8 billion tax cut)
- permanently extending the American Opportunity Tax Credit ($92.4 billion tax cut)
- enacting green energy tax incentives ($23.7 billion tax cut), and
- permanently extending the Earned Income Tax Credit expansion ($17.8 billion tax cut).
Under the plan, federal revenues would increase by 2.8% over ten years. Except for the excise tax increases (mainly a 94 cents per pack tax hike on cigarettes), most of the proposed tax increases would fall on high income taxpayers--those earning over $250,000 per year.
President Obama's tax proposals are a long way from being adopted. They represent only another salvo in the ongoing war over taxes--a war that is far from over.