President Barack Obama wants to again rely on the top-earning U.S. households for most of the tax increases he’s proposing.
Obama’s budget plan, released today, would cap tax deductions for top earners, increase the estate tax, eliminate private-equity managers’ ability to receive lightly taxed carried interest and require those earning more than $1 million a year to pay a minimum tax rate.
“The wealthiest individuals and biggest corporations cannot keep taking advantage of loopholes and deductions that most Americans don’t get,” Obama said in Washington today.
In a break from past budgets, Obama’s fiscal 2014 budget reserves most business tax increases and new business breaks for a plan that would reduce the corporate tax rate. The budget sets aside $95 billion for this purpose.
Under Obama’s budget plan, in 2023 the federal government would collect 20% of the gross domestic product as revenue, the first time it would hit that mark since 2000.
That’s compared with 16.9% this year and 19.1% projected for 2023 if Congress does nothing, according to the Congressional Budget Office. Congressional Republicans want to rewrite the U.S. tax code without adjusting overall revenue levels from the CBO projection.
Under Obama’s plan, the federal government would collect a total of $41.2 trillion over the next decade, compared with $40.2 trillion if Congress raises no additional revenue. That means the two parties are about $1 trillion -- or 2.5% -- apart.
“The president got his tax hikes in January,” House Speaker John Boehner, an Ohio Republican, said today. “We don’t need to be raising taxes on the American people.”
New tax provisions scattered through the budget join many proposals that Obama has made since 2009.
Obama endorsed a proposal from Representative Dave Camp, the Republican chairman of the House Ways and Means Committee, to impose mark-to-market taxation on derivatives. The budget says the proposal would raise $19 billion over the next decade.
By 2018, Obama proposes returning the estate tax to the parameters in place in 2009, raising $72 billion over 10 years. That plan would drop the per-person exemption to $3.5 million from $5.25 million this year and increase the top tax rate to 45% from 40%. The $3.5 million figure wouldn’t be indexed for inflation.
Obama signed a law in January that set and made permanent the current estate tax parameters. His budget plan doesn’t seek to rewrite other portions of that law, which set the threshold for the top marginal rate at $450,000, not $250,000 as he had wanted.