United States

President Obama’s fiscal 2015 tax proposals in brief

TAX ALERT  | 

The tax proposals in the Obama administration's fiscal 2015 budget (the Greenbook) would raise revenue through higher taxes on many businesses and individuals and increase spending by expanding on a variety of tax credits for low-income individuals and favored local development projects. Although it contains some base-broadening proposals similar to those contained in Congressman Dave Camp's recently unveiled tax reform proposal, the revenue raised by the Administration's proposal would not be used directly to reduce individual or corporate tax rates. Instead, the plan contains a reserve of $248 billion for an unspecified revenue-neutral business tax reform, which holds out the hope of tax reform but does not make many of the difficult decisions that a comprehensive plan would require.

The proposals of greatest potential interest or concern to middle-market businesses and the higher-income taxpayers that tend to own or operate such businesses are highlighted below. The revenue estimates are those of the Administration for the 10-year period from 2015 through 2024.

Major tax increases

  • $651 billion – Increase  taxes for high-income individual taxpayers through the limitation of itemized deductions and imposition of a 30 percent minimum tax, effectively limiting the use of the existing preference for long-term capital gains and qualified dividends
  • $276 billion – Increase taxes on foreign activities of U.S. businesses
  • $131 billion – Reverse the estate tax compromise enacted in the American Taxpayer Relief Act of 2012 by raising rates and lowering exemptions, along with other changes
  • $83 billion – Repeal the last-in, first-out (LIFO) method for inventory accounting
  • $45 billion – Eliminate various fossil fuel preferences
  • $28 billion – Place a maximum on how much individuals can save in tax-favored retirement accounts
  • $15 billion – Increase unemployment insurance taxes
  • $14 billion – Tax "carried interest" as ordinary income

Major business tax reductions

  • $248 billion – Reserve for unspecified, revenue-neutral business tax reforms
  • $108 billion – Enhance and make permanent the research tax credit
  • $56 billion – Extend and index for inflation current law expensing rules for small business

Based on comments from Capitol Hill, it is very unlikely that the president's proposal will either become law or form the basis for discussions that may lead to comprehensive tax reform. One reason for this would appear to be the level of spending proposed in the president's fiscal year 2015 budget−approximately $3.9 trillion. For the fiscal year that ended on Sept. 30, 2013, the level of government spending had dropped below $3.5 trillion. Thus, this budget would envision a significant spending increase.

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This publication represents the views of the author(s), and does not necessarily represent the views of RSM LLP.  This publication does not constitute professional advice.

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