President Barack Obama's $4 trillion budget
has unveiled 10 major tax hikes to pay for a range of new spending on education and infrastructure, setting White House on a crash course with Republicans just weeks into the new Congress.
According to Politico
, Obama also plans to use the hikes to fund middle class tax cuts.
The following is a list of the 10 biggest tax hikes:
1. The "Buffett" tax
: a reference to billionaire investor Warren Buffett's complaint that he pays a lower tax rate than his secretary: The White House proposes that millionaires pay a minimum tax rate of 30 percent, which would raise $35 billion.
2. Limits to Itemized Deductions for the Wealthy:
Obama intends to limit the value of itemized deductions used by the wealthy, such as mortgage interests, to 28 percent of their income, raising an estimated $640 billion.
3. and 4. Capital Gains/Second Death Duty:
Obama wants to increase t
he top rate of the capital gains tax to 28 percent from its current rate of about 25 percent (with surcharges), and expand the categories subject to it, especially those passed from one generation to the next.
In an example provided by the conservative Americans for Tax Reform
, a house bought for $10,000 has a fair market value of $100,000 at the time it is inherited by a surviving child. The child then sells it for $120,000, paying under current law a capital gain of $20,000. Under the proposed new law, the child would pay a capital gain on $110,000, the house's current sale price minus its original purchase price.
5. "Mitt Romney" loophole:
The administration's plan is to target those who amass large sums in their retirement accounts. It would prevent contributions to tax-preferred accounts once a balance of $3.4 million is reached, which provides an estimated annual income of $210,000. This hike is estimated to raise $26 billion.
6. & 7. Taxes on Multinational Companies:
Obama expanded his plan to revamp business taxes this year to include a new system of taxes for multinational companies with overseas profits, according to Politico. In addition to the proposals to cut the top corporate tax rate from 35 percent to 28 percent, Obama would put a new 19 percent minimum tax on global profit.
The intent is to push companies to repatriate cash instead of stockpiling it overseas, and with the introduction of the new system will come a one-time mandatory 14 percent tax on current offshore profits, Politico reported.
The one-time repatriation tax is estimated to raise $268 billion. The 19 percent rate on global profits is expected to raise about $206 billion.
8. Bank tax:
Obama proposes to impose a 7 basis point fee on the nation's 100 largest banks, with the intent of forcing them to consider their levels of borrowing more closely. That hike would raise $112 billion.
9. Tobacco tax:
The Obama administration intends to nearly double the taxes on cigarettes and small cigars to about $1.95 per pack, an increase from $1.01 per pack, and the tax would be linked to inflation. The hikes would fund an extension of the Children's Health Insurance Program that would otherwise expire without new funding, and would also fund Obama's proposals to guarantee universal access to preschool. This new tax is expected to raise $95 billion, according to Politico.
10. "Gingrich-Edwards" loophole:
Another proposal would revive a plan that prevents people from setting up pass-through businesses to avoid paying payroll taxes including Social Security and Medicare. The loophole got is name after tax returns revealed that former presidential candidates Newt Gingrich and John Edwards had used this arrangement.
The current law allows self-employed people to characterize a large percentage of their income as business profits rather than salary, thereby cutting their taxes. That tax proposal is expected to raise over $74 billion.
The administration is also proposing an expansion in middle- and low-income family tax credits: the child tax credit and the earned income tax credit for low-income workers. It would also create a new $500 "second-earner credit," aimed at married couples with young children who may not feel it is worth having dual incomes. Total cost would be $277 billion, according to Politico.
According to Fox News
, the total of Obama's tax increases comes to more than $2 trillion over the next decade.
"The president is advocating more spending, more taxes and more debt," House Speaker John Boehner said, according to Fox News. "A proposal that never balances is not a serious plan for America's fiscal future."
Obama has called for 101 different cuts and consolidations for a savings of $14 billion in 2016. Of that total, $3.6 billion would draw from discretionary programs, while another $10.6 billion would come from cracking down on fraud within agencies and accounts such as the Internal Revenue Service and the Social Security Disability Insurance Trust Fund, The Hill
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