What's inside Obama's budget

What's inside Obama's budget
© Cameron Lancaster

President Obama’s final budget contains about 145 proposals dealing with government revenue, including about a half dozen that he has never proposed before.

About 115 of the tax proposals were rolled over from last year’s budget. Roughly 15 were modified because they were partially enacted last year, while roughly 12 were changed because of policy shifts, a senior Treasury official said.

Here are the highlights from the budget request unveiled Tuesday. 

New proposals

• One of the biggest additions to Obama’s budget is the call for a $10.25 per barrel oil tax. The administration announced this proposal last week, drawing heavy criticism from congressional Republicans.

• Another new addition is changes to ObamaCare’s “Cadillac tax” on high-cost healthcare plans. The tax has come under fire from both Democrats and Republicans, and its implementation was delayed by two years under legislation passed in December.

Under the president’s proposal, healthcare plans would only be subject to the Cadillac tax if they cost more than the greater of the threshold under current law and the cost of a gold healthcare plan in their state.

• Obama is pushing to allow employers that are not in the same line of business to join a multiple-employer, defined-contribution retirement plan. This would allow smaller companies to receive savings in administrative costs, the Treasury official said.

• He wants to require that all income from businesses and high-income taxpayers be subject to a 3.8 percent Medicare tax.

• And proposes a new tax credit that business could receive if they hired graduates from community and technical colleges.  

Building off the tax deal 

• Several of Obama’s tax proposals in the budget seek to build on legislation enacted in December that extended expired tax breaks. 

The “tax extenders” package indefinitely extended expansions of the earned income tax credit (EITC) and the American opportunity tax credit (AOTC) that were created by the 2009 stimulus law. Those tax credits would be expanded further under Obama’s budget.

The president proposes expanding the EITC to more workers without children, an idea that Speaker Paul RyanPaul RyanWhy Mariel Cuban criminals deserve amnesty (and Anti-Castro Republicans should support it) GOP agrees on one thing: ObamaCare taxes must go Ryan reminds lawmakers to be on time for votes MORE (R-Wis.) also supports. Obama also calls for the creation of a tax credit for married couples where both spouses work.

• The expansion of the AOTC is part of a broader Obama proposal to simplify tax benefits for college affordability.

Under his proposal, the tax credit would be available for longer and to more students, while the refundable portion of the credit would be simplified and increased. The current lifeline learning credit and student loan interest deduction would be consolidated into the expanded AOTC. Also, Pell Grants would become exempt from being taxed or being included in the calculation of the AOTC amount, and student loan debt forgiveness wouldn’t be taxed. 

• Obama’s budget would simplify the research and development tax credit, which was extended indefinitely in December.

Business tax reform
 

• The budget includes the same business tax reform proposals that Obama put forward last year, including a one-time 14-percent tax on U.S. companies’ earnings held overseas that haven’t been taxed, and a minimum 19 percent tax on companies’ foreign income going forward. 

• The president’s plan also aims to curb corporate inversions, or transactions in which a U.S. company merges with a foreign company and then reincorporates overseas to lower its tax burden. Under current law, the merged company is not treated as a foreign company for tax purposes if the former U.S. parent owns more than 80 percent of the merged company. Obama proposes lowering that threshold to 50 percent.

Tax hikes on the wealthy

• Obama again offered a number of proposals aimed at making wealthy people pay their “fair share” of taxes. He proposes capping the value of many tax preferences at 28 percent, implementing the “Buffett Rule” so that those making more than $1 million have to pay at least 30 percent of their income in taxes, and restoring the estate tax to its parameters for 2009.