Only one thing is clear about the fiscal cliff negotiations: President Obama will push hard to increase taxes on the rich. During a press conference on Wednesday he said he would not extend further a tax cut for folks who don’t need it, referring to the Bush Tax cuts.
Obama’s position is for a broad $4 trillion deficit-reduction plan that includes $1.6 trillion in new revenue from households making more than $200,000 ($250,000 if married).
New tax measures Obama has put to thought:
Let some Bush tax cuts expire: Obama wants to let the Bush tax cuts that apply to income over $200,000 expire.
- If that happened, the top two tax rates — currently 33% and 35% — would increase next year to 36% and 39.6%.
- Increasing investment tax rates on the rich, which would increase the rate to 20% for capital gains and to one’s top income tax rate for dividends. Both are currently taxed at 15%.
It is estimated that those changes would raise close to $1 trillion over a decade, assuming that the income exemption levels for the Alternative Minimum Tax are adjusted for inflation.
Limit tax breaks: The idea of limiting the value of deductions and exclusions that high-income households enjoys has been proposed. With this idea, more than $500 billion would be raised.
Hike carried interest rates: The president has called for taxing carried interest as ordinary income, raising an additional $13.5 billion over a decade.
Impose millionaire minimum tax: Obama’s 2013 budget proposal calls on Congress to use his proposed “Buffett Rule” as a guiding principle when it embarks on tax reform. The rule would ensure that those making more than $1 million pay at least 30% of their income in taxes.
Enact business tax proposals: Obama proposed a host of smaller tax changes. Some of them would decrease revenue, and others would increase revenue.
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