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16 February 2011
Obama’s Budget: Big Tax Hikes For Business
February 2011, Free Enterprise, US Chamber magazine
In sharp contrast to his call last month for a corporate tax overhaul and a better business environment, President Obama’s proposed budget for the fiscal year beginning in October calls for over a trillion dollars in tax increases for businesses of all sizes and sectors over the coming decade.
“The budget documents make it clear that the administration’s approach to lowering the deficit falls disproportionately on raising taxes on successful small businesses, high income individuals, and corporations—especially those that must compete in the global economy,” says the U.S. Chamber’s Chief Economist Dr. Martin Regalia. “While we agree that getting the deficit under control is important, our first priority in meeting this goal must be to increase economic growth and create jobs. Placing the emphasis on increasing taxes is not the right recipe.”
The tax increases proposed in the president’s budget and its accompanying Greenbook are rehashes of provisions the president tried unsuccessfully to get through Congress over the past two years. The president wants to raise the top two individual income tax rates to 36% and 39.6%, hurting successful small businesses. The Chamber successfully opposed a similar proposal last year and helped secure legislation to extend all marginal income tax rates. Under the president’s new proposal, successful small business owners that fall in the upper income levels also would face a 20% rate on dividends and capital gains, up from the current 15%. And, the budget reduces the ability of small business owners to use itemized tax deductions for mortgage interest, state and local taxes, and charitable contributions.
That’s not all. The proposed budget includes $44 billion in new taxes on the oil and gas industry, $15 billion in new taxes for certain investment managers, and changes in inventory-accounting methods that would cost businesses an additional $61 billion. The president also proposes raising taxes companies pay on overseas profits by $129 billion over the next 10 years.
The president’s budget blueprint offers little in the way of tax cuts to help businesses expand and grow. In contrast to the more than $1 trillion in new taxes business can expect to face over the next decade, businesses will see only $116 billion worth of tax cuts, $106 billion of which is comprised of a Chamber-supported permanent research and development (R&D) tax credit.
