By Susan Duclos
Barack Obama's 3.78 trillion tax and spend proposal, downloaded from the White House website, is embedded in an earlier post here. ATR has compiled a list of the top ten tax hikes included in the 244-page document Obama calls a budget.
FYI- The White House has confirmed Obama's budget contains tax hikes on the middle class.
Despite all the tax increases listed below, Obama's budget proposal never balances the nation's budget.
List below:
There are literally dozens of new tax increases in the FY 2014 Obama budget.
In total, they increase taxes by nearly $1 trillion over the next
decade. They would permanently bring the federal tax burden to 20
percent of economic output, a level only reached in one year since World
War II (FY 2000, when the economy was roaring and tax revenues were
pouring into Washington as a result).
Below are the top ten tax increases in President Obama's budget (all numbers are over a decade):
1. Chained CPI. The budget would change the
definition of inflation for all federal budget purposes, including
federal tax provisions. Because tax brackets and other tax items are
indexed to inflation, slowing down their growth is an income tax
increase. This is a tax increase for all Americans who pay income tax,
including middle class Americans. In the past, Congress' Joint Committee on Taxation has estimated that enacted "chained CPI" would be a $100 billion tax increase
2. Itemized deduction cap. The Obama budget limits
the maximum value of itemized deductions, like those for charitable
donations and mortgage interest. This is an income tax increase. No
matter what tax bracket you are in, under this Obama provision you can't
benefit any more than if you were in the 28 percent bracket. There are
three tax brackets higher than this: 33 percent, 35 percent, and 39.6
percent. These families will not be able to fully deduct things like
mortgage interest, charitable deductions, and state taxes paid. Note
that this is on top of the phaseout of itemized deductions ("Pease")
that President Obama forced on taxpayers in the fiscal cliff. Tax increase: $529 billion
3. Death tax hike. The Obama budget would raise the
death tax rate from 40 percent today to 45 percent. It would also
reduce the inflation-indexed death tax "standard deduction" from $10.3
million today for married couples (half that for singles) to $3.5
million with no inflation adjustment. There are also other death tax
increases of a more technical nature. Tax increase: $79 billion
4. "Buffett rule." The President's budget would
impose a new "Buffett rule" on taxpayers whose adjusted gross income
exceeds $1 million. These taxpayers would have to face an average tax
rate (that is, their tax bill divided by their income less charitable
contributions) of 30 percent. Tax increase: $53 billion
5. Tobacco tax hike. The President's budget nearly
doubles the tobacco tax, from $1.01 to $1.95 per pack, and then indexes
it to inflation from there. This is a clear tax hike on middle class
Americans. According to independent estimates, the average smoker in
America makes about $40,000 per year.
Additionally, tobacco taxes are a declining tax revenue base, and as a
result it's inappropriate to fund new government programs using it. This
isn't the first time President Obama has raised federal tobacco taxes.
In 2009, on his sixteenth day in office, he signed into law a 156
percent increase in the tobacco tax. Such tax increases are a violation
of Obama's central campaign promise not to sign "any form of tax
increase" on Americans making less than $250,000 per year. Tax increase: $78 billion
6. IRA and 401(k) plan restrictions. There are two
new tax increases on IRA and 401(k) savers in the President's budget.
The first restricts the total account balance in ALL tax preferred IRAs
and 401(k)s to a combined $3 million. The second would require that
non-spouse beneficiaries of IRAs and 401(k)s distribute all money within
five years, rather than over their lifetime. Additionally, the budget
forces all employers with 10 or more employees to open payroll-deduction
IRAs at work. Tax increase: $14 billion
7. "Carried interest" capital gains tax hike. Under
current law, capital gains are taxed at rates lower than ordinary
income to reflect the double taxation of investment capital, risk, and
other factors. The current top capital gains tax rate is about 24
percent. Some capital gains are received by managing partners of
investment partnerships. These capital gains are known as "carried
interest." Despite the fact that these capital gains are no different
than capital gains anywhere else (and are the same source of capital
gains that the limited partners in such arrangements receive), the
President's budget taxes these capital gains at ordinary income tax
rates, which are nearly 45 percent on an all-in basis. Tax increase: $16 billion
8. Energy tax hikes. There are energy tax hikes
littered throughout the budget. Taken together, these tax increases
will have one effect and one effect only: higher prices for consumers at
the gas pump and in their utility bills. Tax increase: $94 billion
9. Tax increases on international income. The U.S.
is one of the only developed nations that taxes the income of U.S.
companies and individuals which are earned overseas (so-called
"worldwide taxation"). In so doing, we potentially expose this money to
taxation in two different countries on the same earnings. The Obama
budget increases the likelihood that this double taxation will occur by
removing protections against it. Ideally, the U.S. would only seek to
tax income earned within the United States, a system known as
"territoriality." Tax increase: $158 billion
10. Financial system tax increases. These, too, are
littered throughout the budget. They would impose taxes on banks,
brokerage firms, life insurance companies, and virtually every other way
that the middle class saves and invests. These costs will be passed
along in the form of higher fees, bigger commissions, and lower returns
to shareholders. Tax increase: $94 billion
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