Thursday, February 16, 2012

Efforts to significantly raise taxes and redistribute of wealth are alive and well in Obama budget plan.

I didn't give President Obama's budget proposal a close look until I saw this article on what President Obama's budget actually includes. The proposed tax increases are enormous.

These proposed tax increases are merely efforts to keep paying for the expansion of government. They target the wealthier, but it certainly won't stop there. The middle class are certainly the next on list for tax increases.

The budget blueprint contains roughly $2 trillion in new taxes and fees. When other tax cuts and credits are counted, the net impact from the proposals is still about $1.5 trillion.

Though Republicans already are mounting a vigorous campaign against the proposal, many of the tax provisions still could become law unless Congress takes action to stop them.

At the top of that list is the expiration of the tax cuts approved during the George W. Bush administration. They're scheduled to expire at the end of 2012, and the White House estimates that letting them lapse, at least for households making more than $250,000, could pump $968 billion into the federal coffers over the next decade.

Allowing those rates to expire, as Obama's budget proposes and as current law would allow absent intervention, would mean the following changes:

-- For households making more than $250,000 and individuals making more than $200,000, the top income tax rate would rise from 35 percent to 39.6 percent.

-- For those same households, the top rate on qualified dividends would rise from 15 percent to 39.6 percent.

-- The top rate on long-term capital gains would rise from 15 percent to 20 percent.

-- The estate tax, known disparagingly as the "death tax," would rise to 45 percent from 35 percent.

The hike in investment income tax for top earners, though, would be compounded by another surcharge included in the federal health care overhaul. That 3.8 percent surtax would bring the top dividend rate to 43.4 percent. The top capital gains rate would, likewise, be 23.8 percent.

Along the same lines, the budget plan would make sure hedge fund managers and others pay an ordinary income tax rate for what's known as "carried interest" -- or profits, in the investment world -- instead of the 15 percent rate. That's projected to bring in another $13 billion over the next decade.

Aside from those changes, the budget calls for implementing the so-called Buffett Rule. This would ensure that every household making more than $1 million pays at least 30 percent of their income in taxes.

The budget also cuts the value of itemized deductions to a 28 percent rate for households making more than $250,000. That would cover popular deductions like the mortgage interest deduction and charitable deductions -- and it's projected to raise $584 billion over 10 years.

The bulk of the changes are aimed at upper-income earners.

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