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.
To find out how we can help you make an appointment with us today at 401-254-0151. We look forward to hearing from you.