Monday, the administration released their budget plan which was purported to reduce the tax burden on middle-class Americans. There will be clear winners and losers under the plan, so here are the high points:
- Making Work Pay tax creditÃ¢â‚¬â€$400 for individuals, $800 for a couple filing jointlyÃ¢â‚¬â€through 2011. This was already in place for 2009, 2010.
- Middle Class Income Taxes – Extending the tax cuts enacted under Bush for families making less than $250,000 and individuals making less than $200,000.
- Hiring Businesses – Budget would give companies a $5,000 tax credit for each new worker they hire in 2010. Businesses that increase wages or hours for their current workers in 2010 would be reimbursed for the extra Social Security payroll taxes they would pay. I question how helpful the second part is. Would this just make companies rethink a new hire since they could employ overtime for less money now? Some new hire decisions on the fringe may suffer.
- Research Outfits – Make the research and experimentation tax credit permanent, saving businesses about $83 billion over the next decade.
- Business Capital Outlays – Extend a provision allowing businesses buying equipment such as computers to accelearte depreciation through 2010, saving them $20 billion over the next decade.
- High Income Earners – Raise the top two income tax rates for individuals, from 33 percent and 35 percent, to 36 percent and 39.6 percent, respectively. Result: nearly $1 trillion in higher taxes on couples making more than $250,000 and individuals making more than $200,000 by not renewing Bush-era tax cuts for them.
- Investors - Increase the top capital gains tax rate from 15 percent to 20 percent for families making more than $250,000 a year and individuals making more than $200,000. This may have a gradual impact on stock market returns. With a higher capital gains rate, high net worth investors may shift to other assets with a more desirable net return profile.
- Oil and Gas Companies & Multinationals - Increase taxes on U.S. companies with major overseas operations, and plans to increase taxes on oil and gas companies to the tune of about $39 Billion over the next decade. Also, restrict the ability of international companies to defer taxes on profits made overseas, raising about $26 billion over the next decade.
- Charities – Since many charities rely on contributions from high income earners, the new limit on itemized tax deductions high earners can claim for charitable donations, mortgage interest and state and local taxes, will likely hurt.
- Banks/Financials - Enact a “financial crisis responsibility fee” on large firms that may be “too big to fail”, raising $90 billion over the next decade.
- Fund Managers – Change the way profits by investment fund managers are taxed, raising an additional $24 billion over the next decade.
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Thoughts on these proposals?
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