Obama's 2014 budget to help shape broad US tax debate
Barack Obama will put forward a list of detailed proposals to overhaul the U.S. tax code, hoping this time Congress will stir itself to action.
WASHINGTON: President Barack Obama will put forward on Wednesday a list of detailed proposals to overhaul the U.S. tax code, hoping this time Congress will stir itself to action.
In his 2014 budget plan, the president will seek to change how Social Security is adjusted for inflation - a controversial idea that would directly impact the retirement program's roughly 57 million beneficiaries.
The inflation adjustment plan is unlikely to get through Congress on its own. But taken together, the president's proposals could play a role in a broad tax reform effort.
Congress for years has failed to muster the bipartisan resolve needed for such a project, but its two top tax law writers said on Monday they are trying. Last week the White House previewed Obama's 2014 budget plan. Here are elements that are likely to be in it.
INDIVIDUAL TAXES CAPPING DEDUCTIONS - Obama will likely reintroduce his longstanding bid to cap the value of itemized individual income tax deductions, such as the charitable giving write-off, and some exemptions, such as the tax break on municipal bond interest.
The cap proposal - applied in past budgets only to household income above $250,000 - would limit the value of tax breaks to 28 percent as one moves to a higher tax bracket.
For example, a taxpayer in the current 35-percent tax bracket with $100,000 worth of qualified deductions and exemptions now gets a $35,000 tax break. Under the 28-percent limit, that taxpayer would only get a $28,000 tax break.
IRA LIMITS - The 2014 budget proposal will seek to limit the value of tax-free individual retirement accounts, or IRAs, to no more than $3 million.
TOBACCO TAX - Obama's budget will call for an unspecified boost in the tax on tobacco products to fund an expansion of pre-kindergarten education programs.
CARRIED INTEREST - The White House will likely revive a proposal to increase taxation of "carried interest," a type of income for senior managers at private equity firms and some other investment funds. Most of this income today is taxed at the top capital gains rate, now 20 percent, rather than the 39.6-percent top tax rate on ordinary income.