President Obama’s Budget Would Raise Taxes by $1.3 Trillion

March 07, 2014

President Obama’s fiscal year 2015 budget proposes to increase taxes on individuals by over $834.4 billion and on businesses by about $500 billion, for a total of over $1.3 trillion in new taxes over the next ten years. This total does not include the nearly $500 billion in additional revenue that the president would gain through new fees and changes to programs such as health care and agriculture in order to reach $1.759 trillion in new revenue. (See here for an overview of the budget’s tax changes.)

Tax Increase of $834.4 billion on Individuals

Under Obama’s budget, individuals would see a net increase of $834.4 billion after new taxes of $931.7 billion offset by $97.3 billion in tax reductions (see table below). The president proposes multiple provisions to increase taxes on high earners by reducing the value of tax expenditures they are able to claim by $598 billion.

Additionally, the budget would institute a new “Fair Share Tax,” based on the Buffet Rule, which creates a new minimum tax of 30 percent on high-income earners. It would also raise the estate tax from its current 40 percent to 45 percent and decrease the exemption, for new revenue of $131 billion.

It’s important to note that pass-through businesses, which pay taxes through the individual tax code, would likely be hit by some of the tax increases on the individual side of the code, specifically the ones mentioned in this section.

Tax Increase of $508.1 Billion on Businesses

Like individuals, businesses would also see a tax increase under the president’s budget. Businesses would see new taxes of $769.2 billion with offsets of about $261.1 billion in tax decreases (see table below). Many of these decreases come in the form of extending provisions that existed in the 2013 tax code, such as increased expensing for small businesses (Section 179), which saves businesses $56.8 billion, and making permanent the research and development tax credit, which accounts for $108 billion over ten years.

The major tax increases come from $276.3 billion in international tax reforms, as well as a retroactive tax increase of $150 billion from deemed repatriation of past foreign earning. The repeal of the last in, first out accounting method also raises $82.7 billion.

 

Tax Changes for Individuals in President Obama's Fiscal Year 2015 Budget

Source: OMB 2015 Budget Summary Tables

Tax Increases for Individuals

 

Limits to Total Accrual of Tax Preferred Retirement Accounts

$28.377

 

Increased Tobacco Taxes and Index for Inflation

$78.217

 

Impose Liability on Shareholders to Collect Corporations Unpaid Income Taxes

$5.238

 

Cost Basis of Stock Covered by Security must be determined with Average Cost Basis Method

$3.515

 

Reduce Value of Certain Tax Expenditures for Upper Income Earners

$598.066

 

Implement Buffet Rule through new "Fair Share Tax"

$53.026

 

Revert to 2009 Parameter for Estate and Gift Tax and Additional Changes

$131.057

 

Taxes Carried Interest as Ordinary Income

$13.797

 

Require Non-Spouse Beneficiaries of Deceased IRA Owners to Take Inherited Distributions over No More than Five Years

$5.159

 

Make Unemployment Insurance Surtax Permanent

$15.200

Subtotal of Individual Tax Increases

$931.652

 

 

 

Tax Decreases for Individuals

 

Expanded EITC

-$59.740

 

Modify Tax Exempt Bonds for Tribal Governments

-$0.112

 

Expand Child and Dependent Care Tax Credit

-$9.610

 

Extend Exclusion from Income for Cancellation of Certain Home Mortgage Debt

-$7.665

 

Exclusion from Income for Student Loan Forgiveness for students in Certain Income Repayment Programs who have Completed Payments

-$0.005

 

Exclusion for Student Loan Forgiveness for Certain Scholarship amounts for Participants in HIS programs

-$0.165

 

Make Pell Grants Excludable from Income

-$8.863

 

Including Simplification of Rule for Claiming EITC for Workers without Qualifying Children and Repeal of Telephone Excise Tax

-$11.129

Subtotal of Individual Tax Decreases

-$97.289

 

 

 

Net Tax Increase for Individuals

$834.363

 

Tax Changes for Businesses in President Obama's Fiscal Year 2015 Budget

Source: OBM 2015 Budget Summary Tables

Tax Increases for Businesses

 

Transition to Reformed Business Tax System

$150.000

 

Conform SECA Taxes for Professional Service Businesses

$37.679

 

"Financial Crisis Responsibility Fee" and Other Financial Reforms

$56.374

 

Reinstate Superfund Taxes

$23.270

 

Increase Oil Spill Liability Trust Fund

$0.951

 

Enhance and Modify Conservation Easement Deduction

$0.522

 

Eliminate Deduction for Dividends Held in Certain ESOPs

$7.883

 

Changes to International Tax Provisions

$276.305

 

Elimination of Oil and Natural Gas Tax Provisions Including Elimination of Intangible Drilling Costs and Percentage Depletion

$44.838

 

Elimination of Coal Provisions Including Repeal of Expensing of Exploration and Development Costs

$3.965

 

Repeal of LIFO

$82.708

 

Modification of Like-Kind Exchanges for Real Property (1031 Exchange)

$18.270

 

Other Revenue Changes Including Modification of Depreciation Rules for Business Aircrafts and Changes in Other Accounting Method

$18.148

 

Tax Gap and Compliance Reforms

$17.078

 

Reformed Treatment of Financial and Insurance Industry, including Marked to Market

$31.162

Subtotal Tax Increases for Business

$769.153

 

 

 

Tax Decreases for Businesses

 

Provide Additional Tax Credits for Investment in Qualified Property Used in a Qualifying Advanced Energy Manufacturing Project

-$1.896

 

Designate Promise Zones

-$5.876

 

New Manufacturing Communities Tax Credit

-$4.664

 

Tax Credit for the Production of Advanced Technology Vehicles

-$4.825

 

Tax Credit for Medium and Heavy Duty Alternative-Fuel Commercial Vehicles

-$0.401

 

Extend Tax Credit for Cellulosic Biofuel

-$1.698

 

Modify and Extend Tax Credit for Construction of Energy Efficient New Homes

-$2.048

 

Reduce Excise Tax on LNG to Bring into Parity with Diesel

-$0.020

 

Automatic Enrollment in IRAs, including a Small Employer Tax Credit and Double the Tax Credit for Small Employer Start-up Costs

-$14.507

 

Tax Incentive for Locating Jobs and Business Activity in U.S.

-$0.212

 

Enhance and Make Permanent the R and E Tax Credit

-$108.146

 

Extend and Modify Certain Employment Credits

-$9.714

 

Modify and Make Permanent Renewable Electricity Production Tax Credit

-$19.286

 

Modify and Make Permanent the Deduction for Energy-Efficient Commercial Building Property

-$6.068

 

Extend Increased Expensing for Small Business

-$56.828

 

Eliminate Capital Gains Taxation on Investments in Small Business Stock

-$9.202

 

Increased Limitation for Deductible New Business Expenditures and Consolidates Provisions for Start-Ups

-$4.258

 

Expand and Simplify Credits Provided to Qualified Small Employers for Non-Elective Contributions to Employee Health Insurance

-$1.326

 

Permanently Extend and Modify the New Markets Tax Credit

-$8.713

 

Reform and Expand the Low-Income Housing Tax Credit

-$1.390

Subtotal Tax Decreases for Businesses

-$261.078

 

 

 

Net Tax Increase for Businesses

$508.075

Update: This article was updated with new information. The taxes included in "Reform Treatement of Financial and Insurance Industiry, including Marked to Market" totaling $31 billion were previously excluded. Additionally, carried interest has been moved to the individual tax changes. The tables and chart above reflect these changes.

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