* Obama revives earlier cuts to business tax breaks
* Cuts unlikely to move outside broader tax revamp
* Tax rates for wealthiest would rise after 2012
(Adds details, comments)
By Kim Dixon
WASHINGTON (Reuters) - U.S. President Barack Obama
revived earlier proposals to raise tens of billions of dollars
by cutting tax breaks enjoyed by America's biggest companies,
ideas that have floundered in Congress for several years.
Obama's 2012 budget request sent to Congress on Monday
proposes to raise $129 billion over 10 years by limiting
deferral of taxes on income earned abroad and curtailing what
the White House calls abuse of foreign tax credits, among other
Last year's budget proposal was similar, seeking to raise
about $122 billion by trimming loopholes.
By cutting these and other corporate tax preferences and
letting low tax rates for the wealthiest individuals lapse, the
proposal raises about $328 billion in taxes over a decade.
Obama's budget proposed halving the U.S. deficit by 2013
and cutting $1.1 trillion over the next decade. [nN14301981]
Most of the business tax ideas have stalled in Congress in
the past two years, even when Democrats controlled both
chambers. With Republicans now in power in the U.S. House of
Representatives, they are even less likely to move.
"Pretty clearly the business revenue raisers are retreads
of last years," said Clint Stretch, a principal at Deloitte and
a former congressional tax staffer. "They could not pass the
111th Congress; hard to see how they could pass in the 112th."
Another proposal would limit "excess returns" on offshore
transfers of intellectual property, a move to curb firms
shifting profits among countries to minimize their taxes.
The White House also boosted the amount it wants to raise
by trimming tax preferences for oil, gas and coal companies, to
$46 billion over a decade from $38 billion a year earlier.
Lawmakers from both parties say they back a major tax code
overhaul instead of tackling individual tax provisions.
The president's budget did not contain a concrete proposal
to revamp the tax code, but called on lawmakers to begin "the
process of corporate tax reform," without adding to the
deficit, expected to top $1.5 trillion this fiscal year.
Obama and Republicans both want to trim the top marginal 35
percent corporate tax rate, but differ on whether new revenues
should be found elsewhere in the budget to offset the cost of
this cut. This disagreement will likely delay an overhaul for a
few years. [ID:nN0447125]
Obama ties rate cuts to paring targeted tax breaks, which
will lead to a major lobbying blitz among industries vying to
preserve their special treatment.
"We cannot afford a tax code burdened with special interest
tax breaks," the budget summary reads.
An administration official who spoke on the condition of
anonymity said corporate tax changes could occur before an
overhaul of the tax code for individuals.
TAXES ON WEALTHY WOULD RISE
On the individual tax side, Obama renewed calls to let
lower tax rates on high-income earners rise when they expire at
the end of 2012 and repeated a bid to raise dividend taxes on
high earners to 20 percent, from the current 15 percent.
Obama also reintroduced his bid to limit itemized
deductions for high earners to 28 percent of income, a proposal
that has met fierce resistance from lawmakers in recent years.
That provision would fund a fix to the alternative minimum
tax, a parallel tax system set up to ensure the wealthy pay
some taxes, but which has been increasingly hitting
upper-middle class taxpayers.
The White House also revived a bid to tax 'carried
interest' - profits earned by fund managers who often pay the
lower capital gains tax rate.
The Obama budget would tax those profits at steeper
ordinary income rates, but the proposal was narrowed to only
apply to financial partnerships.
Carried interest taxes came close to passage in Congress
last year, but its fate is now uncertain.
(Reporting by Kim Dixon, editing by Anthony Boadle)
© 2013 Thomson/Reuters. All rights reserved.