01 May 2014 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.Disclaimer: This blog and website are public sources of general information concerning our firm and its lawyers, as well as the information presented. They are intended, but not promised or guaranteed, to be correct, complete, and up-to-date as of the date posted. This blog and website are not intended to be, and are not, sources of legal opinion or advice. The materials, information, and communications on this blog and website do not apply to any particular person, entity, or situation, and do not apply to you or to your specific situation. You will need to consult with an attorney and/or other appropriate professional about your specific situation. Thank you.