Day195 Saturday 03/12/11

ran 1.4 miles
Americans for Tax Reform, you can check them out at www.atr.org, highlighted President Obama’s initial budget proposal from mid-February with some disappointing numbers. This information was published on February 14, 2011. Since then an extension favoring the GOP’s more realistic agenda of spending severely less money was passed. Although these numbers will more than likely not apply to the budget, should Congress ever concur on a plan, it is important to note that this is what Obama wanted and brought to the table as a solution to tackle our overwhelming deficit.

Tax hike “lowlights”, as ATR referred to them, include:

• Raising the top marginal income tax rate (at which a majority of small business profits face taxation) from 35% to 39.6%. This is a $709 billion/10 year tax hike

• Raising the capital gains and dividends rate from 15% to 20%

• Raising the death tax rate from 35% to 45% and lowering the death tax exemption amount from $5 million ($10 million for couples) to $3.5 million. This is a $98 billion/ten year tax hike.

• Capping the value of itemized deductions at the 28% bracket rate. This will effectively cut tax deductions for mortgage interest, charitable contributions, property taxes, state and local income or sales tax, out-of-pocket medical expenses, and unreimbursed employee business expenses. A new means-tested phase-out of itemized deductions limits them even more. This is a $321 billion/ten year tax hike

• New bank taxes totaling $33 billion over ten years

• New international corporate tax hikes totaling $129 billion over ten years

• New life insurance company taxes totaling $14 billion over ten years

• Massive new taxes on energy, including LIFO repeal, Superfund, domestic energy manufacturing, and many others totaling $120 billion over ten years

• Increasing unemployment payroll taxes by $15 billion over ten years

• Taxing management capital gains in an investment partnership (“carried interest”) as ordinary income. This is a tax hike of $15 billion over ten years

• A giveaway to the trial lawyers---not letting companies deduct the cost of punitive damages from a lawsuit settlement. This is a tax hike of $300 million over ten years

• Increasing tax penalties, information reporting, and IRS information sharing. This is a ten-year tax hike of $20 billion

All together, this budget is a ten-year, $1.5 trillion tax hike over present law. The “tax relief” in the budget is essentially an extension of present law, and also some refundable credit outlay spending in the tax code. There is virtually no new tax relief relative to present law in Barack Obama’s budget.

There is little surprise House Republicans found this proposal appalling. And it is very surprising that our president would submit such a proposal that calls for higher taxes to pay for more government spending at a time like this. Under this budget, tax revenues would grow from 14.4% of GDP in 2011 to 20% of GDP in 2021.

1,527.6 miles to go.