Obama’s renewed call for a rewrite of the corporate part of the tax code wouldn’t raise additional revenue for the government. Last year, the administration released a framework that sought to lower the corporate tax rate to 28% for most companies and 25% for manufacturers.
The budget plan doesn’t specify all of the tax breaks that would need to be eliminated or curtailed to meet those rate targets. The revenue target assumes -- as does the House Republican budget -- that tax breaks scheduled to expire at the end of 2013 would lapse as scheduled. That means extending any of them, such as the research and development tax credit, would need to be offset with savings elsewhere.
The budget plan would raise taxes for many lower-income households. Obama’s proposal to change the inflation gauge to the chained Consumer Price Index would make the standard deduction, personal exemption and tax bracket thresholds grow more slowly than projected, causing more income to be taxed at higher rates.
The change in inflation measures would yield $100 billion in tax revenue over 10 years.
Obama proposes a $78 billion increase in tobacco taxes. Other new items in the budget include a cap on an individual’s tax-preferred retirement accounts and a requirement that people who inherit individual retirement accounts take taxable distributions over five years instead of their projected life span.
The cap on retirement accounts would be implemented by prohibiting taxpayers from adding more tax-free money to the accounts once the limit is reached. The cap would be set starting at $3.4 million, the amount needed to fund a $205,000 annual annuity for a 62-year-old.
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