U.S. Tax Reform – White House Budget 2015

Hot on the heels of Chairman Camp’s tax reform proposal, the White House released its fiscal year 2015 budget on March 4, 2014 which included major tax reform proposals.  As with Chairman Camp’s proposal, we are unlikely to see the budget passed in its current form, but it does represent a starting point for debate.  The White House Budget is light on details compared to Chairman Camp’s discussion draft, however this post will summarize the main points of the budget and a subsequent post will review points of agreement between Chairman Camp’s discussion draft and President Obama’s budget.

A lot of the revenue raising changes in this budget were proposed in previous years.  Carried interest would be taxed as ordinary income and S Corporation shareholders would be subject to self-employment tax on their earnings.  The budget would cap the benefit of itemized deductions to 28% regardless of the top rate of tax payable.  The “Fair Share Tax” is also up for consideration again.  Sometimes call the “Buffett Tax,” this would impose a minimum tax rate of 30% on high-earners.  The budget also proposes taking the Estate Tax back to 2009 levels, which would raise the rate from 40% to 45% and lower the exclusion to $3,500,000.

The additional revenue raised from the above changes would go towards expanding the Earned Income Tax Credit and the Child Tax Credit.  The Earned Income Tax Credit would double in some instances and the minimum age for a claim would reduce from 25 to 21.

The budget would raise revenue from businesses through changes to the international tax system such as implementing a deemed repatriation of overseas profits and by calculating the foreign tax credit on a pooled basis.  The budget also proposes a new form of Subpart F income for digital goods and services.  Overall, the budget’s international tax provisions would raise an additional $276 billion over the next ten years.

Banks would face a new “Financial Crises Responsibility Fee” which would be a tax on bank liabilities.  As with previous budgets from President Obama, this one eliminates most of the oil, coal, and natural gas tax preferences, while making green energy tax credits permanent.

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Roger Royse
rroyse@rroyselaw.com

Roger Royse, the founder of the Royse Law Firm, works with companies ranging from newly formed tech startups to publicly traded multinationals in a variety of industries. Roger regularly advises on complex tax structuring, high stakes business negotiations and large international financial transactions. Practicing business and tax law since 1984, Roger’s background includes work with prominent San Francisco Bay area law firms, as well as Milbank, Tweed, Hadley and McCloy in New York City.
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