President Obama released a $4.1 trillion budget yesterday. TPC’s Howard Gleckman says the plan includes about $3 trillion in tax hikes over ten years, mostly to pay for new initiatives. These taxes include a $10 per barrel oil tax, a 19 percent minimum tax on future corporate income earned abroad, a 14 percent one-time levy on past income not yet repatriated back to the US, a fee on highly-leveraged financial institutions, a “Buffett tax” on millionaires, and a cap on the value of deductions and other tax preferences at 28 percent. As expected, the GOP swiftly called it “dead on arrival.”
In the President’s budget: A loophole closes to raise more for the ACA. Brookings Institution’s David Wessel explains. To help pay for the Affordable Care Act, Congress and the President passed the Net Investment Income Tax for couples with incomes over $250,00 and individuals with incomes over $100,000. The tax applies to interest, dividends, royalties and “income derived from a trade or business in which the taxpayer does not materially participate.” Smart tax accountants could help assure taxpayers were in fact “active” participants and avoid the tax—they just had to create partnerships, limited liability corporations or S-corporations The President’s budget, however, would tax nearly all trade or business income, irrespective of their structure. That could raise $272 billion over 10 years.
The Senate may take up an Internet tax ban this week. Majority Leader Mitch McConnell predicts the chamber may debate a permanent extension of the federal ban on state and local taxes on Internet service. The measure, which already passed the House, is stuck on a customs bill.
Also on the Hill today… Treasury Secretary Jack Lew and IRS Commissioner John Koskinen discuss the federal budget with the Senate Finance Committee.
Aiming lower: John Kasich. The GOP presidential candidate says he’s open to lowering the corporate tax rate below his proposed 25 percent. Kasich also proposes three brackets for personal income taxes, with the top rate at 28 percent. And he'd reduce the capital gains and dividends tax to 10 percent. Did his flexibility contribute to his second-place finish in New Hampshire?
Now the feds are unhappy with Liberty Tax Services franchises in South Carolina. The Justice Department would like to close three shops in Columbia, South Carolina. According to the civil suit filed by Justice, the franchises filed false federal income tax returns in order boost their customers’ refunds.
As for California and its tax on health insurance plans… The state legislature is trying to sort out the mess over how to replace a tax that applies to managed care organizations that serve state’s Medicaid program, Medi-Cal. The bill, which is expected to be considered by committees this week, shifts around some taxes to allow California to continue receiving federal matching funds for Medi-Cal.
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