During the last presidential campaign, Barrack Obama proffered a number of promises in his bid to take the White House. None were clearer than his pledge to take larger tax bites from multinational corporations and the wealthy. In total, Obama has proposed more than $1 trillion in higher taxes on upper-income individuals and corporations.
In April, Obama announced phase 1 in his plan—raise taxes on those families and businesses making more than $250,000 per year. (In reality, the threshold is probably $200,000 per family.) He would also let the Bush tax cuts expire in 2011. This was just the beginning of an ambitious plan to increase tax revenues 40 percent by 2013.
Then on May 4, he revealed phase 2 of his tax plan with the release of the Department of Treasury statement titled “Leveling the Playing Field.”
It says: “Today, President Obama and Secretary Geithner are unveiling two components of the Administration’s plan to reform our international tax laws and improve their enforcement. First, they are calling for reforms to ensure that our tax code does not stack the deck against job creation here on our shores. Second, they seek to reduce the amount of taxes lost to tax havens—either through unintended loopholes that allow companies to legally avoid paying billions in taxes, or through the illegal use of hidden accounts by well-off individuals.”
A major part of the plan involves changing the deferral rules that allow U.S. companies to “ship jobs overseas,” according to the administration. Democrats have “for years” called for “ending tax breaks for companies that ship jobs overseas and giving tax breaks to companies that create jobs here in America,” according to Obama.
Currently, U.S. companies are allowed to defer the taxes they pay on overseas income as long as the money remains invested in operations abroad. This would end under the Obama plan. It would eliminate deferral provisions and other “loopholes” for offshore subsidiaries and end nearly $190 billion in tax breaks for multinationals during the next decade.
For high-income earners, the administration’s plan would restore the top two income tax rates to their pre-2001 levels of 36 percent and 39.6 percent (currently, they are 33 percent and 35 percent). In addition, the plan would reinstate limitations on deductions or personal exemptions high-income taxpayers may take. It sets a 28 percent cap on tax deductions for items such as mortgage interest, investment expenses and charitable gifts for Americans in the two highest tax brackets that would have allowed 36 cents and 39.6 cents on the dollar to be deducted for these expenses before the proposed changes.
Obama also proposes new taxes on securities dealers and life insurers, and to raise revenue by prohibiting certain...