President Barack Obama proposed a budget that calls on Congress to raise the taxes of the highest U.S. earners, multinational corporations and oil and gas companies.
The budget plan, released today in Washington, includes revenue-raising provisions that Congress has rejected or brushed aside before.
They include allowing pre-2001 tax rates to return for individuals earning more than $200,000 annually and married couples making more than $250,000. Under a law Obama signed in December, the lower tax rates expire at the end of 2012.
“These policies were unfair and unaffordable when enacted and remain so today,” Obama wrote in his budget message.
The budget plan includes a proposal that would limit itemized deductions for top earners, curbing the value of tax breaks for charitable contributions and home mortgage interest.
Under the budget’s assumptions, federal revenue as a percent of the economy would increase from 14.9 percent in 2010 to 20 percent in 2021. Part of that increase stems from projected economic growth, not from policy changes.
The plan includes offsets for the first three years of a “patch” that would prevent the alternative minimum tax from expanding. By not permanently paying for limits on the reach of this one-time tax on the wealthy, the administration assumes a revenue source toward the end of the 10-year budget timeframe that Congress has consistently opposed.
Obama is proposing an array of tax incentives. They include the elimination of capital gains on some small business stock, a permanent extension of the tax credit for business research and extension of a tuition tax credit. He is proposing to revive the Build America Bonds program, which expired at the end of 2010.
Obama again proposes limits on multinational companies’ ability to defer income taxes on profits they earn outside the U.S. Corporations such as Microsoft Corp. and Cisco Systems Inc. have argued against the proposals in previous years. Those provisions would raise an estimated $129 billion over 10 years.
The budget includes about $46 billion in proposals to change the tax treatment of oil, gas and coal companies.
The budget plan also proposes a series of changes to simplify tax laws. For example, it would allow auto dealers to collect a $7,500 tax credit on the sale of plug-in electric cars rather than require buyers to wait until they file tax returns to claim the credit.
Another provision would repeal a tax rule that requires retirees to take minimum withdrawals from individual retirement accounts with a balance of less than $50,000 after they turn 70 ½. “The administration proposes to simplify tax compliance for retirees of modest means,” according to the budget plan.
Also in the proposal is $85.4 billion in fees that would be collected over a decade, including a new one to help the Commodities Futures Trading Commission carry out oversight of derivatives. The proposed budget estimates the CFTC would collect $117 million in fees in 2012 alone.
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