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

President Obama’s treasury secretary and chief economic adviser admit they cannot rule out raising taxes on middle-class Americans to curb the soaring budget deficit and fund health care reform.

With more federal spending expected on the economic stimulus package, extended unemployment benefits and health care reform, revenue sources to cover these expenses just aren’t available.

The Obama administration is treading lightly on the issue of raising of taxes to calm the public. Both Treasury Secretary Timothy Geithner and National Economic Council Director Larry Summers sidestepped questions on the President’s intentions about taxes. Geithner said the White House was not ready to rule out a tax hike to address the federal deficit; Summers said Obama’s proposed health care overhaul needs funding from somewhere.

President Obama vowed “you will not see any of your taxes increase one single dime” during his presidential campaign. But the simple truth is the federal spending on economic recovery combined with an ambitious plan to revamp American health care - will have to be paid for.

On Friday, the government released a report that suggests the worst U.S. recession since WWII appears to be ending. But President Obama cautioned about a quick turnaround.

“Well, as I’ve said, I think we maybe are beginning to see the end of the recession, but it’s still going to be some time before we are seeing companies hiring again. That’s usually the last thing that happens,” Obama said in an interview with Univision that aired on Sunday.

“So I think we are still going to have a tough remainder of the year — probably until next year — but, you know, at least what we are seeing — we’ve pulled back from the possibility of a depression. That’s not the danger.”

Private economic forecasters suggest that unemployment will come down in the second quarter of 2010 with positive growth in the latter half of 2009.

But at the same time, Geithner and administration officials are pondering how to ask Congress for more funds to extend unemployment benefits for Americans who have recently lost their jobs. The proposal drew some support from Sen. Jim DeMint, R-S.C., as long as the benefits come from the already approved economic stimulus package.

Opponents of the plan question whether the proposal will benefit the country.

Senator John McCain stated, “I think it’s pretty clear, if you pump trillions of dollars into the economy, you will see some recovery,” the Arizona Republican said while giving Obama credit for the improvement. “But the long-term consequences, I think, are going to be, unfortunately, devastating unless we do something about it.”

Geithner and Greenspan appeared on ABC’s “This Week.” Summers appeared on NBC’s “Meet the Press” and CBS’s “Face the Nation.” DeMint was interviewed on “Fox News Sunday.” McCain spoke with CNN’s “State of the Union.”

source: Associate Press

According to a report by the Champaign-Urbana, Ill. on Nov 5, 2008, nearly 160 people in Champaign County and 42 in Vermilion County are due federal tax refunds or economic stimulus payments, but the IRS has been unable to deliver them.

“In Illinois, the average undeliverable stimulus payment is $569, and the average undeliverable regular refund is $957,” said Sue Hales, an IRS spokeswoman in Illinois. “That’s a lot of money that could come in handy as the holidays approach.”

It’s crucial that taxpayers who may be due a stimulus check update their addresses with the IRS by Nov. 28. By law, economic stimulus checks must be sent out by Dec. 31 of this year.

At least one person whose name appeared on the list of people due payments said he’s already received his check.

“They messed up my stimulus payment, but I got it straightened out and did receive it,” said William Clary, who lives on Duncan Road in Champaign.

Clary said the IRS told him the original check was issued July 11. After he asked where it was, he was notified Sept. 9 a new check would be issued. He deposited the new check about three weeks later.

“They said it was undeliverable,” Clary said. “I’ve only lived here 12 or 13 years. They don’t have trouble finding me any other time.” Barry Rowe, a retired Champaign school teacher, said he was able to arrange for his stimulus payment shortly after being notified Thursday by The News-Gazette that he was on the list.

He said he called the IRS and was told he would receive the check in three to four weeks.

Rowe said he thinks his “undeliverable” status was related to his May 2007 move to the Turnberry Ridge subdivision.

“We moved, and our accountant had actually put the old address on our return,” he said.

Oddly enough, notice of the impending stimulus payment came to the new address, but the check itself never arrived. Rowe wondered whether it might have been deposited directly into his account.

Now that the check has been reissued, Rowe, a former technology director for Champaign schools, is considering what to do with it.

Maybe “buy a new computer,” said Rowe, to help keep track of future checks.

Nationally, the IRS says fewer than 1 percent of the checks it mails out are returned by the postal service as undeliverable.

Through September, the government had distributed 116 million economic stimulus payments, with only about 279,000 checks being undeliverable. The IRS distributed more than 105 million regular refunds, and only about 104,000 of those were undeliverable.

To find out whether you’re one of them, you can go to the IRS Web site www.irs.gov and use the “Where’s My Refund?” and “Where’s My Stimulus Payment?” tools to check the status of your payment. You can also get instructions on how to update your address.

Those without Internet access can call 1-866-234-2942 to check on the status of a stimulus payment or 1-800-829-1954 to check on the status of a federal tax refund.

Maybe President Obama, the former Senator from Illinois can help his constituents.

I have been looking at the tax plans for both presidential candidates. I believe that both have good ideas and bad ideas. But it’s fair to say that we really don’t know if either of them will work.

It is true that Barack Obama’s plan is focused more on helping the “common man”, by providing tax relief to middle America - but at what expense?

Will a measly $1,000 a year really make the difference? How are we going to pay for it? The national deficit is growing at an alarming rate and additional tax cuts will just add to it.  This could have long term devastating effects on the economy and the value of the once “almighty dollar”.

On the other hand, John McCain’s tax plan calls for giving big business and the highest earners the larger tax cuts.  The “trickle down economics” of the republican plan doesn’t sit well with most Americans. But let’s be fair - it had worked in the past (some will obviously disagree).

So what is the right course to take on tax reform?  Everyone has ideas, but no one knows for sure.  I believe that giving the middle and lower classes a tax break can help the “psychology” of America.  It can help average folks feel like there is a future - that this economic crisis can be turned around.

The Obama plan calls for promoting and supporting domestic small businesses and that is great for America.  I believe that John McCain feels that same way, but he hasn’t really come across as the savior for the middle class.

I think both candidates agree that Alternative Minimum Tax must be eliminated. The tax reforms of 2001 expire in 2010 and AMT will tax more than 20 million Americans, if it is not changed.

John McCain’s plan calls for cutting the corporate tax rate to 25%, down 10% from the current 35%.  But will that only help big business?

Both candidates agree in health care reform. But again, it will cost trillions, yes trillions of dollars in the long run. Can we afford it - can we afford not to do it?

The bottom line is this: We won’t know what will work until a new president is elected,and the tax plan has time to mature.

I hate to say it - but most Americans want immediate gratification and middle class Americans deserve something to look forward to. The John McCain plan sounds great for big business and the wealthy - but what about the rest of us?