President Obama has proposed a fiscal year 2016 budget that raises $3.5 trillion in fiscal year 2016 and $45 trillion over 10 years.
In his budget, Obama also proposes that over the next 10 years, tax cuts of $349 billion be accompanied by tax increases of $1.9 trillion, for a net 10-year tax increase of $1.6 trillion.
The table below shows the details.
Summary of Tax Provisions in President Obama’s Fiscal Year 2016 Budget (Fiscal Years 2016-2025)
|Tax Cuts (billions)|
|Second Earner Tax Credit||$ 89|
|More Generous Child Care Tax Credit||$ 50|
|Education Tax Incentives||$ 46|
|Automatic Enrollment IRAs and Small Employer Tax Credit Increase||$ 17|
|Other Individual Tax Cuts||$ 75|
|Increased Tax System Corporate Welfare||$ 72|
|Total Tax Cuts||$ 349|
|Tax Increases (billions)|
|Itemized Deduction Limitation||$ 603|
|Capital Gains Tax Increase||$ 208|
|Fair Share Tax (Buffett Rule)||$ 35|
|Financial Tax on Financial Institutions’ Liabilities||$ 112|
|Tax Carried Interest as Ordinary Income||$ 18|
|Limitation on Retirement Plans||$ 26|
|Increased Self-Employment Tax||$ 75|
|Other Tax Increases||$ 24|
|Higher Estate and Gift Taxes||$ 214|
|Higher Tobacco Taxes||$ 95|
|Higher Unemployment Insurance Taxes||$ 16|
|Other Tax Increases||$ 22|
|Procedural Changes Designed to Reduce the Tax Gap||$ 25|
|19 Percent Tax on Foreign Income||$ 268|
|Other Tax Increases||$ 12|
|Business “Tax Reform” (Net of Corporate Welfare Tax Cuts)||$ 200|
|Total Tax Increases||$ 1,953|
|Net Tax Increase||$ 1,604|
Source: Table S-9, Budget of the United States Government, Fiscal Year 2016
The president’s budget would repeal, let expire or limit:
- the Lifetime Learning Credit;
- the student loan interest deduction (for new borrowers);
- Coverdell accounts; and
- 529 education savings plans.
The president’s budget would:
- triple the maximum Child and Dependent Care Tax Credit (CDCTC);
- expand the American Opportunity Tax Credit;
- create an auto-enroll IRA for workers without an employer-based retirement plans (with an option to opt out);
- create a new second earner credit of up to $500 for families where both spouses work; and
- expand the Earned Income Tax Credit (EITC) for workers without children and for non-custodial parents.
The president’s budget would raise taxes in many ways. For example, it would:
- increase the capital gains and dividend tax rate to 28 percent (inclusive of the net investment income tax);
- end stepped-up basis by treating bequests and gifts as realization events that would trigger tax liability for capital gains;
- raise estate and gift taxes;
- limit the value of itemized deductions to 28 percent;
- create an additional alternative minimum tax designed to ensure certain high income taxpayer pay at least 30 percent of income —after charitable contributions—in taxes;
- impose a 19 percent on the foreign earnings of U.S. companies;
- raise tobacco taxes; and
- impose a tax on the debt of financial institutions.
In addition, Obama’s budget increases the corporate welfare provided through the tax code, with substantially higher subsidies for alternative energy and politically favored infrastructure.
The budget does contain a constructive provision that would permanently extend section 179 expensing allowing small business to deduct up to $1 million of capital expenses.