A top presidential campaign adviser to Sen. Barack Obama , D-Ill., was on Capitol Hill recently for private discussions with Democratic lawmakers about Obama’s economic plans. Taxes were a major subject of the discussions. The nonpartisan Tax Policy Center recently released an analysis that included Obama’s tax plans.
Partial extension of the 2001 and 2003 tax cuts: Obama’s plan would extend the tax cuts affecting the middle class while eliminating those benefiting the wealthiest Americans.
Alternative minimum tax patch: Obama plans to extend and index the 2007 AMT patch.
Estate tax: Obama plans to freeze the estate tax law in its 2009 form – an exemption of $3.5 million with a top tax rate of 45 percent.
New tax cuts: Obama plans to:
- Credit 6.2 percent of earnings up to $8,100 for wage earners and the self-employed.
- Create a refundable credit equal to 10 percent of mortgage interest – a maximum of $800 – for taxpayers who do not itemize their deductions.
- Eliminate the income tax for seniors making less than $50,000 per year.
- Extend the phase-in maximum income range for the earned-income tax credit (EITC) for childless filers and increase the phaseout threshold.
- Increase the EITC phase-in credit rate to 45 percent for families with three or more children.
- Increase to $5,000 the add-on to the EITC phaseout threshold for married filers.
- Make the child and dependent care tax credit refundable and increase the maximum credit rate to 50 percent.
- Make the tax credit for retirement savings fully refundable and change its formula to a 50 percent match up to $1,000 of contributions.
- Make permanent the research and development tax credit and renewable-energy production tax credit.
- Mandate automatic 401(k) and IRA accounts through employers.
- Increase the higher education tax credit to a 100 percent match rate on up to $4,000.
Health: Obama would create a new insurance exchange and mandate income-related subsidies for health insurance purchased through the exchange. His plan would penalize employers who fail to provide health insurance to their employees.
Tax increases: Obama tax increases would include:
- Increasing the capital gains rate to 25 percent.
- Treating carried interest as ordinary income.
- Eliminating oil and gas industry tax breaks.
- Requiring publicly traded financial partnerships to pay the corporate income tax.
- Codifying the economic substance doctrine that requires transactions qualifying for tax benefits to have economic justifications beyond those benefits.
- Reallocating multinational tax deductions.
- Requiring information reporting of basis for gains.
Simplification of the tax process: Under Obama’s plan, taxpayers who file simple returns would have the option of submitting pre-filled tax forms that only need the taxpayer’s signature.