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