Monday, February 14, 2011

Obama's FY2012 Budget: Taxes, Taxes, and More Taxes

President Obama released his budget this morning.  Rather than focusing on Washington’s over-spending problem, the budget calls for higher taxes on families and small businesses to pay for even more government spending.  Under the Obama budget, tax revenues will grow from 14.4% of GDP in 2011 to 20% of GDP in 2021.  By comparison, the historical average is only 18% of GDP.

Tax hike lowlights include:

  • Raising the top marginal income tax rate (at which a majority of small business profits face taxation) from 35% to 39.6%.  This is a $709 billion/10 year tax hike
  • Raising the capital gains and dividends rate from 15% to 20%
  • Raising the death tax rate from 35% to 45% and lowering the death tax exemption amount from $5 million ($10 million for couples) to $3.5 million.  This is a $98 billion/ten year tax hike
  • Capping the value of itemized deductions at the 28% bracket rate.  This will effectively cut tax deductions for mortgage interest, charitable contributions, property taxes, state and local income or sales taxes, out-of-pocket medical expenses, and unreimbursed employee business expenses.  A new means-tested phaseout of itemized deductions limits them even more.  This is a $321 billion/ten year tax hike

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