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 in Washington, 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 to pay a minimum tax rate.
In a break from past budgets, Obama wants to reserve most business tax increases to pay for a cut in the corporate tax rate rather than designate the revenue for deficit reduction.
Under Obama’s budget plan, in 2023 the federal government would collect 20 percent of the gross domestic product as revenue, the first time it would hit that mark since 2000.
That’s compared with 16.9 percent this year and 19.1 percent 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.
New tax provisions scattered through the budget plan accompany many repeated 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.
Estate Tax
By 2018, Obama calls for 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 percent from 40 percent.
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.