Individual tax proposalsObama would extend the Bush-era tax rates for one year while re-instating higher tax rates on higher-income individuals. Obama proposes that tax rates of 36% and 39.6% should replace the current top two brackets of 33% and 35%. These top rates would apply for married couples earning over $250,000 per year and unmarried persons earning more than $200,000 per year. For people in this higher-income range, Obama would also
- reinstate the phase-out of personal exemptions,
- reinstate the limitation on overall itemized deductions,
- treat dividends as ordinary income, and
- set tax rate on long-term capital gains at 20%.
Consider tax reform after the election. Obama may be willing to consider comprehensive tax reform after the election. In the same statement of June 9th, 2012, Obama proposed, "And then next year, once the election is over, things have calmed down a little bit, based on what the American people have said and how they've spoken during that election, we'll be in a good position to decide how to reform our entire tax code in a simple way that lowers rates and helps our economy grow, and brings down our deficit."
Obama has also proposed many tax changes aimed at individuals as part of his revenue proposals for the year 2013 (also referred to as the Green Book). Some of these proposals include:
- Making permanent the American Opportunity Tax Credit as a replacement for the previous Hope Credit,
- Making permanent the expanded Earned Income Tax Credit for families with three or more children,
- Making permanent the expanded Child and Dependent Care Tax Credit,
- Extending through the end of 2014 the exclusion from income for cancellation of home mortgage debt, and
- Excluding from income student loan debt that is forgiven after 25-years of income-contingent repayment.
Business tax proposalsObama proposes reducing the corporate tax rate to 28% from the current 35% top rate. Obama has spelled out various tax proposals for corporate and business tax in The President's Framework for Business Tax Reform and in the 2013 Green Book, including:
- Eliminating the last-in, first-out method of accounting for inventories,
- Taxing carried interest as ordinary income,
- Reducing the amount of interest that can be deducted by businesses,
- Making permanent the expanded deduction for start-up expenses up to $10,000,
- Expanding the health insurance tax credit so that employers with up to 50 employees might qualify.
Estate tax proposalsObama proposes that the estate tax be revised such that the top estate tax rate is 45% with an exclusion of $3.5 million, and make permanent the ability of surviving spouses to retain any unused estate tax exclusions (a feature known as portability).