The largest single tax increase in Obama’s budget, raising $529 billion over 10 years, would set a 28% cap on the value of tax breaks such as the mortgage interest deduction, the exclusion for employer-provided health insurance and municipal bond interest.
The cap would affect anyone in a marginal tax bracket higher than 28%, which ends at $223,050 of taxable income for married couples and $183,250 of taxable income for single taxpayers.
The budget reprises the president’s proposals aimed at the $3.7 trillion state and local government bond market. It seeks to limit the tax exemption on interest income reaped by the highest-earning investors, a step local governments say would hit them with higher borrowing costs.
The plan also seeks to create new bonds, similar to the now-lapsed Build America Bonds program, to subsidize spending on public projects, including the new school buildings.
Obama renewed a proposal to create a Federal Aviation Administration air-traffic control fee of $100 per flight to help pay for airports and aviation oversight. The plan, which would apply to both commercial and private jets, has been stymied by congressional and industry opposition.
The administration is recycling a request to increase the $2.50-per-flight-segment fee, which it says covers less than 30% of aviation security costs. The budget calls for a new $5 minimum fee per one-way trip, which would increase to $7.50 in 2019. That would collect $9 billion in additional revenue over five years and $25.9 billion over 10 years, the administration said.
The $2.50 fee is projected to bring in $2.25 billion this year, compared with $5.22 billion in aviation security costs. The fee increase has been previously rejected by Congress.
The budget plan would raise about $2.5 billion for the Treasury over the next decade through increases in royalty fees on oil, gas, coal and other mineral production on federal lands, and fees meant to prod companies into producing on lands for which they hold leases, according to the Interior Department’s budget document. The U.S. received more than $9 billion in 2012 from fees, royalties and other payments related to oil and gas development on federal lands and waters.