Reuters: President Barack Obama is expected to make a raft of recommendations for changing tax law on Monday, in addition to his new proposed tax on the rich — known as the “Buffett tax” after billionaire Warren Buffett — which was disclosed on Saturday.
Obama, in a White House talk, will make his recommendations to the U.S. Congress “super committee” that is trying to find by November 23 at least $1.2 trillion in new budget savings over 10 years. That would be on top $917 billion in 10-year deficit reduction agreed to in an August deal to raise the debt limit.
The U.S. budget deficit in 2011 is expected to be about $1.3 trillion. The national debt stands at $14.7 trillion.
Here are some of the tax measures Obama has either already proposed, or may be looking at, to raise more tax revenue to help reduce the deficit, according to analysts:
* The president wants a new tax on the rich, known as the “Buffett tax.” Details were sketchy, but uber-investor Warren Buffett, chairman of Berkshire Hathaway, in mid-August made his own tax proposal. If Obama’s recommendation resembles the Buffett plan, then it would look like this:
–Hold income taxes steady for more than 99 percent of U.S. taxpayers. Raise rates, to an undetermined level, for individuals with income exceeding $1 million. Raise taxes for the super-rich making more than $10 million per year.
The “Buffett tax” could be a 5.4 percent surtax on joint returns above $1 million and individual returns above $500,000. If it is, it could bring in as new government revenue about $480 billion over 10 years, said analysts at MF Global.
* Under a $447-billion jobs plan unveiled on September 8, Obama asked for a cap on itemized tax deductions and some exemptions at 28 percent for individuals earning more than $200,000 a year and families earning more than $250,000.
POSSIBLE FURTHER RECOMMENDATIONS
* The president may call for reining in the mortgage interest deduction. This could include denying it for second mortgages on vacation homes and yachts; lowering a $1 million cap on eligible first mortgages to perhaps $500,000; converting the deduction to a limited tax credit; or killing it, said analysts who stressed any changes would be phased in slowly.
* Another possibility is limiting the employer-provided healthcare income exclusion for higher-income tax brackets. It cost about $117.3 billion this year.
* In his jobs plan, Obama said he wants to close a loophole that lets private equity and hedge fund managers pay the 15-percent capital gains rate, instead of the 35-percent income rate, on much of their income known as “carried interest.”
* On the corporate tax front, Obama may suggest a repeal of “last in, first out” accounting; elimination of the deferral of income tax payment on overseas corporate profits; or changing certain large flow-through partnerships (known as S-corps) into corporations, analysts said.
* Republicans and businesses want a lower overall corporate tax rate, but Obama is unlikely to support that without a large number of tax breaks and exemptions being closed.
* The president also wants to end several tax subsidies that support the oil and gas industry, and end a tax break for companies that own private jets.
* Obama may also be considering ways to get U.S. companies to bring home profits now parked abroad. Corporations want a tax holiday allowing them to bring those profits home at a reduced tax rate. They also want a new territorial tax system that would permanently tax exempt those profits, but many in Congress oppose both ideas. Big drug makers and high-tech firms with valuable intellectual property have a lot at stake on this issue.