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, reviving revenue provisions that Congress has rejected or brushed aside before.One thing is for sure. This is not going to fly. Moreover, where are the cuts? And what's with this insane proposal to revive BABs (build America bonds)?
The budget, released today in Washington, would bring back pre-2001 tax rates for individuals earning more than $200,000 annually and married couples making more than $250,000. The estate tax would return to 2009 levels with a $3.5 million per- person exemption and a 45 percent top rate. Under a law Obama signed in December, 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 to 28 percent, curbing the value of tax breaks for charitable contributions and home mortgage interest.
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 tax, which was originally intended to be levied 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.
The administration also wants to send $250 this year to retirees and some government employees who aren�t benefiting from the payroll tax cut included in the December tax law.
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.
Obama has called for an overhaul of the corporate tax code that would lower rates and broaden the tax base. He provided no details on an overhaul in his budget plan.
The budget revives a proposal that Congress pass legislation requiring executives of investment partnerships including private-equity firms to pay ordinary tax rates on the profits they receive as compensation. This pay, known as carried interest, currently can qualify for lower capital gains tax rates. The proposal would raise $14.8 billion over 10 years.
The budget plan includes $85.4 billion in fees that would be collected over a decade, including a new one to help the Commodity Futures Trading Commission carry out oversight of derivatives. The proposed budget estimates the CFTC would collect $117 million in fees in 2012 alone.
The government has no business guaranteeing municipal bonds or any portion of them.
About the only thing I see in the proposal of significant merit is a move to revise an item in last year�s health-care bill that requires businesses to report payments to corporations totaling $600 for services and goods.
If everyone is against that (and they seem to be now), how the hell did that ridiculous provision get in a medical bill in the first place? Note that Obama wants to keep the 1099 requirement for purchases of services, just not goods.
Good grief. Just kill it.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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