Obama’s federal budget proposal is in, and it brings back some some of the same tax increases that were rejected less than 2 months ago.
It’s almost as if the ink on the 2011 Tax Deal isn’t even dry yet, and Obama is ready to change it back again in his new budget.
Let’s take a quick look at the Obama budget tax increases in the new 2010 budget proposal.
Federal Budget Tax Changes
Here are the highlights of many of the tax impacts included in Obama’s federal budget proposal:
- Let the 2001 Bush tax cuts expire at the end of 2012 for those making more than $200,000 ($250,000 for married couples).
- Send a $250 check to retirees and government employees not included in the 2011 Payroll Tax Cut.
- Limit itemized deductions for people in the highest tax brackets to 28%.
- Extend tuition tax credits for college expenses.
- Expand tax credits for child care.
- Make the Earned Income Tax Credit permanent for families with 3 or more children.
- Bring the estate tax back to 2009 limits (with a $3.5 million exemption and 45% top rate).
- Prevent the alternative minimum tax, or AMT, from expanding for three years.
- Eliminate capital gains on some small business stock.
- Eliminate required minimum withdrawals for IRAs with less than $50,000 for retirees over age 70 ½.
- Change the new 1099 reporting rule in the the health care bill requiring 1099s for services only, no longer requiring 1099s for the purchase of goods.
In your spare time, you can read all 216 pages in Obama’s 2012 budget.
Federal Budget Next Steps
Obama’s federal budget proposal will now go through countless committees and subcommittees, hearings and votes. Of course, when it is finally resolved, as we’ve seen before, it probably won’t look anything like the proposal.
My Next Steps
Am I the only one who finds it really difficult to do long term tax planning with all the back and forth on our tax code every few months?
Will Obama’s budget bring back the same tax increases that were eliminated just two months ago?
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No Madison, you are not the only one who finds it difficult to do any planning with all the back and forth. It is hard to make any long-term investments.
This is exactly what businesses are complaing about for the last four years. It is difficult for them to do any serious planning with so much uncertainty, which means they are reluctant to hire new employees or invest in major equipment for there own business (which would spur hiring at other companies). This helps explain why while the economy is recovering, employment is not keeping pace.
I would like to see both business taxes and income taxes simplified, even if it means losing the large mortgage deduction I currently get on my house.
Actually, the chief complaint of businesses is a lack of demand, not uncertainty, according to the National Federation of Independent Businesses:
And businesses have actually invested a lot in major equipment in the last few months: strong equipment orders made a large, positive contribution to economic growth in the last quarter.
Madison, I’d also like to point out that the title and opening line of this post are misleading: quite a few of the things you identified as “tax increases” are actually credits or deductions for certain individuals, such as the EITC, the check to those whose earnings aren’t subject to SS tax, extending the AMT fix, etc.
Thanks for pointing that out. You’re right, it is a little misleading.
When I started writing, I wrote just about the increases, but added to it as I found other tax changes.
I changed the subheading to tax changes, but didn’t split them out. I’ll update it and see if I can make it more clear.
Rimaya, I’m not sure what your point is.
You are correct of course that businesses are more concerned about lack of demand than uncertainty about governement. Likewise, returning to the orginal analogy, Madison is probably more concerned about demand for her services than the convoluted changes to the tax code.
But both businesses and Madison (and the rest of us) are hindered in their long-term
planning by so much uncertainty in the tax-code and government regulation.
Changes in demand are somewhat gradual and easier to adapt to, while changes to government policy are sudden and sometimes traumatic.
Secondly, there is not much if anything the government can do to increase the overall demand of the economy as a whole (though that doesn’t mean a whole lot of money won’t be wasted trying), but it is feasible and simple to reduce or eliminate changes to the tax codes and regulations.
P.S. For a humourous video from Christmas on the subject, see: http://www.bankruptingamerica......-politics/