President Obama’s Budget Would Raise Taxes by $1.3 Trillion
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.
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Tax Changes for Individuals in President Obama's Fiscal Year 2015 Budget |
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Source: OMB 2015 Budget Summary Tables |
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Tax Increases for Individuals |
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Limits to Total Accrual of Tax Preferred Retirement Accounts |
$28.377 |
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Increased Tobacco Taxes and Index for Inflation |
$78.217 |
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Impose Liability on Shareholders to Collect Corporations Unpaid Income Taxes |
$5.238 |
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Cost Basis of Stock Covered by Security must be determined with Average Cost Basis Method |
$3.515 |
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Reduce Value of Certain Tax Expenditures for Upper Income Earners |
$598.066 |
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Implement Buffet Rule through new "Fair Share Tax" |
$53.026 |
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Revert to 2009 Parameter for Estate and Gift Tax and Additional Changes |
$131.057 |
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Taxes Carried Interest as Ordinary Income |
$13.797 |
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Require Non-Spouse Beneficiaries of Deceased IRA Owners to Take Inherited Distributions over No More than Five Years |
$5.159 |
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Make Unemployment Insurance Surtax Permanent |
$15.200 |
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Subtotal of Individual Tax Increases |
$931.652 |
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Tax Decreases for Individuals |
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Expanded EITC |
-$59.740 |
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Modify Tax Exempt Bonds for Tribal Governments |
-$0.112 |
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Expand Child and Dependent Care Tax Credit |
-$9.610 |
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Extend Exclusion from Income for Cancellation of Certain Home Mortgage Debt |
-$7.665 |
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Exclusion from Income for Student Loan Forgiveness for students in Certain Income Repayment Programs who have Completed Payments |
-$0.005 |
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Exclusion for Student Loan Forgiveness for Certain Scholarship amounts for Participants in HIS programs |
-$0.165 |
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Make Pell Grants Excludable from Income |
-$8.863 |
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Including Simplification of Rule for Claiming EITC for Workers without Qualifying Children and Repeal of Telephone Excise Tax |
-$11.129 |
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Subtotal of Individual Tax Decreases |
-$97.289 |
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Net Tax Increase for Individuals |
$834.363 |
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Tax Changes for Businesses in President Obama's Fiscal Year 2015 Budget |
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Source: OBM 2015 Budget Summary Tables |
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Tax Increases for Businesses |
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Transition to Reformed Business Tax System |
$150.000 |
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Conform SECA Taxes for Professional Service Businesses |
$37.679 |
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"Financial Crisis Responsibility Fee" and Other Financial Reforms |
$56.374 |
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Reinstate Superfund Taxes |
$23.270 |
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Increase Oil Spill Liability Trust Fund |
$0.951 |
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Enhance and Modify Conservation Easement Deduction |
$0.522 |
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Eliminate Deduction for Dividends Held in Certain ESOPs |
$7.883 |
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Changes to International Tax Provisions |
$276.305 |
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Elimination of Oil and Natural Gas Tax Provisions Including Elimination of Intangible Drilling Costs and Percentage Depletion |
$44.838 |
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Elimination of Coal Provisions Including Repeal of Expensing of Exploration and Development Costs |
$3.965 |
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Repeal of LIFO |
$82.708 |
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Modification of Like-Kind Exchanges for Real Property (1031 Exchange) |
$18.270 |
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Other Revenue Changes Including Modification of Depreciation Rules for Business Aircrafts and Changes in Other Accounting Method |
$18.148 |
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Tax Gap and Compliance Reforms |
$17.078 |
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Reformed Treatment of Financial and Insurance Industry, including Marked to Market |
$31.162 |
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Subtotal Tax Increases for Business |
$769.153 |
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Tax Decreases for Businesses |
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Provide Additional Tax Credits for Investment in Qualified Property Used in a Qualifying Advanced Energy Manufacturing Project |
-$1.896 |
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Designate Promise Zones |
-$5.876 |
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New Manufacturing Communities Tax Credit |
-$4.664 |
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Tax Credit for the Production of Advanced Technology Vehicles |
-$4.825 |
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Tax Credit for Medium and Heavy Duty Alternative-Fuel Commercial Vehicles |
-$0.401 |
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Extend Tax Credit for Cellulosic Biofuel |
-$1.698 |
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Modify and Extend Tax Credit for Construction of Energy Efficient New Homes |
-$2.048 |
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Reduce Excise Tax on LNG to Bring into Parity with Diesel |
-$0.020 |
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Automatic Enrollment in IRAs, including a Small Employer Tax Credit and Double the Tax Credit for Small Employer Start-up Costs |
-$14.507 |
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Tax Incentive for Locating Jobs and Business Activity in U.S. |
-$0.212 |
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Enhance and Make Permanent the R and E Tax Credit |
-$108.146 |
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Extend and Modify Certain Employment Credits |
-$9.714 |
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Modify and Make Permanent Renewable Electricity Production Tax Credit |
-$19.286 |
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Modify and Make Permanent the Deduction for Energy-Efficient Commercial Building Property |
-$6.068 |
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Extend Increased Expensing for Small Business |
-$56.828 |
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Eliminate Capital Gains Taxation on Investments in Small Business Stock |
-$9.202 |
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Increased Limitation for Deductible New Business Expenditures and Consolidates Provisions for Start-Ups |
-$4.258 |
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Expand and Simplify Credits Provided to Qualified Small Employers for Non-Elective Contributions to Employee Health Insurance |
-$1.326 |
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Permanently Extend and Modify the New Markets Tax Credit |
-$8.713 |
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Reform and Expand the Low-Income Housing Tax Credit |
-$1.390 |
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Subtotal Tax Decreases for Businesses |
-$261.078 |
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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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