President Obama and his administration are seeking almost a $1 trillion tax increase over the next decade on US taxpayers earning more than $200,000. He also wants to take an additional $400 billion from businesses even as it retools a proposed crackdown on international tax-avoidance techniques; according to a Feb 2, 2010 Business Week article.

Believe it or not, the Obama income tax proposal would actually reinstate income tax rates enacted by former President Bush 10 years ago. The income tax rates for single Americans making over $200,000 or joint filers earning more than $250,000 would increase to 36% and 39.6% respectfully. The plan also calls for eliminating preferences for oil and gas companies, life-insurance products, executives of investment partnerships and U.S.-based companies that operate overseas.

“This set of tax reforms strikes a balance between targeted tax cuts to spur investments in job growth and innovation here at home, middle-class tax relief to make our tax system more fair, measures to crack down on abuses that send jobs overseas, and long-term fiscal discipline,” Treasury Secretary Timothy F. Geithner said in a statement.

Obama’s proposed $143.4 billion in new tax cuts for individuals who earn under $200,000. While the budget sets out $93.5 billion in gross tax reductions for businesses, overall they would face a net tax increase.

“The proposed budget’s $300 billion in tax relief over the next 10 years for individuals, families, and businesses is mostly targeted and limited, often to people who don’t have to pay any taxes,” said Senator Charles Grassley of Iowa, the ranking Republican on the tax-writing Senate Finance Committee. “The tax increases in the budget dwarf the tax relief.”

President Obama asked Congress to extend all of Bush’s tax cuts that apply to Americans earning under $250,000. He also proposes almost doubling a tax credit that helps Americans pay for child care and increasing federal subsidies for Individual Retirement Accounts.

The budget assumes the federal estate tax, which expired Jan. 1 and was replaced with a capital-gains tax, will be reinstated retroactively with a 45 percent rate applied when married couples’ estates exceed $7 million. If Congress doesn’t act, the estate tax in 2011 will be reinstated to a 55 percent rate applied to estates valued at more than $1 million.

Obama’s budget also assumes Congress will continue to index the alternative minimum tax for inflation. The minimum tax can impose higher rates on families earning between $75,000 and $500,000 when their deductions are too high relative to their income. It was originally intended to affect only millionaires and is now ensnaring people with lower incomes because it was never indexed for inflation.

The Obama tax budget proposal will most certainly face opposition from Congress.  This proposal will also be opposed by the influential and wealthy US taxpayers.  Is Obama’s tax proposal political hari-kari?

source: businessweek.com

According to unconfirmed sources, Barack Obama is being smeared by baseless claims that he would dramatically raise marginal tax rates to levels not seen since the 1970s or impose new taxes on everything from your child’s education fund to your water.

These accusations have no basis in truth and, according to Obama supporters, are repeatedly debunked.  Here are some key facts about the plan to set the record straight:

1) The Obama Plan Provides Generous Tax Cuts for Almost All American Families
The Obama plan will the typical family will pay tax rates that are 20% lower than they faced under President Reagan. Any and all charges that Obama would raise rates on capital gains, dividends, income, savings and so on for the approximately 98% of American families making less than $250,000 are simply not true.

2) The Obama Plan Would Cut Taxes For Middle Class Families By Three Times More Than Senator McCain’s Plan.
In recent weeks, the McCain campaign has repeatedly suggested that Obama voted to increase taxes on families making $42,000 per year. Factcheck.org declared this claim “simply false,” and the Washington Post Editorial Board determined that this claim was “unacceptably misleading.”

3) Under the Obama Plan, No One Will Pay Higher Tax Rates Than They Paid in The 1990s
Barack Obama believes that any responsible candidate must put forward specific ideas of how they would pay for their proposals to put us back onto the path of fiscal responsibility. That is why he has called for repealing a portion of the tax cuts passed in the last eight years for families making over $250,000. But he would limit all rates to be at or below what they were in the 1990s. Families making over $250,000 would pay the 1990s marginal income tax rates – of 39.6 and 36 percent – and capital gains and dividend tax rates of 20%. Obama’s 20 % capital gains rate is the lowest rate from the 1990s, and his 20% dividends rate is 39 percent lower than the rate President Bush proposed in 2001, and lower than all but 5 of the last 92 years we have been taxing dividends.

4) Obama Would Lower Taxes For the Vast Majority of Small Businesses
This is false because the Obama plan preserves existing tax rates for families making less than $250,000 a year, nearly 99 % of small business owners won’t see any tax increase under the Obama plan. Instead, these small firms and business owners are likely to get a tax cut under the Obama plan, which eliminates capital gains taxes for small businesses, provides a new 50% tax credit for healthcare, and helps lower health care costs to make small businesses competitive.

5) Obama Will Provide New Tax Benefits to Help Families Save and Create Wealth
The notion that Obama will raise taxes on families’ assets like their “homes” or “life savings” is absurd. In radio and TV ads, the McCain campaign has alleged that Barack Obama would increase taxes on “your life savings” or the “sale of your home”—bedrock assets for ordinary Americans. But in fact, Barack Obama and Joe Biden will repeal the estate tax for 99.7% of estates, offer a new universal mortgage tax credit to help working families achieve homeownership, and will offer a new, fully refundable 50% credit on the first $1,000 of retirement savings done by American families. Factcheck.org called these McCain attacks “simply not true for the vast majority of viewers who will see [them]” while the Washington Post called them “dishonest.”