Obama puts ‘Buffett’ tax in play to help raise $580bn

US PRESIDENT Barack Obama yesterday revived a list of his favourite ideas for raising $580bn in new tax revenue over 10 years from the wealthy, which, while unpopular in Congress, could prove an opening gambit for a longerterm tax overhaul.

While certain to not move forward en masse, some elements of the 2014 budget blueprint, including proposals to stop big corporations from avoiding tax on foreign income, could gain traction as Congress considers a revamp of the tax code and faces a deadline on the government’s debt limit this year.

Mr Obama’s budget proposal officially puts forward the idea of a new “Buffett tax”, named after investor Warren Buffett, that phases in a minimum 30% tax rate on household income above $1m.

“These are all opening bids in any potential grand bargain, so from that perspective they are important,” said Chris Krueger, an analyst at Guggenheim Partners.

Mr Obama’s budget does not seek to raise individual tax rates as he has proposed in prior budgets, according to a White House document. For years, he sought to raise rates on household income above $250,000.

The bid revives Mr Obama’s offer last year to House of Representatives speaker John Boehner, a Republican, during the negotiations to avoid the socalled fiscal cliff of looming tax hikes and spending cuts.

The White House revived a longrunning proposal to cap itemised

deductions and exemptions among wealthier taxpayers — starting at household income of about $250,000.

The cap would apply to the same list of deductions proposed in years past, officials said. That includes the charitable tax break and the exemption for municipal bond interest.

The fiscal cliff deal raised rates for households earning more than $450,000 a year, from 35% to 39.6%.

Also in the budget was an end to the tax break for “carried interest” profits earned by fund managers like those who ran private equity and other investment firms, officials said.

New tax ideas, which officials previewed last week, include boosting taxes on cigarettes and a new $3m limit on taxdeferred individual retirement accounts.

Prominently featured in the budget are proposals to raise hundreds of billions of dollars from US multinational corporations that avoid tax on income held overseas.

Mr Obama is seeking to raise about $157bn over a decade with these measures, up about $10bn from last year’s budget. Further, he sought more revenue than last year from curbing energy tax breaks and ending a tax advantage for corporate jets.

The cuts to corporate breaks are counterbalanced by White House proposals to double a tax credit for small start-up companies and extend a popular business research and development tax credit. Mr Obama further wants to expand a child-care tax credit that less wealthy individuals use.

He backs cutting the top US corporate tax rate to 28% from 35%, now the highest in the industrialised world.

Mr Obama has said that he supports a full-scale revamp of the entire tax code, both individual and corporate, and a White House summary called the budget proposals a “down payment”. Reuters