No. 1: Increase the capital gains and dividends taxes for higher-income taxpayers
Increase capital gains and dividends taxes from 15 to 20 percent for those making more than $250,000 (couples) or $200,000 (single).
No increase in capital gains taxes for high earners
Updated: Tuesday, December 21st, 2010 | By Angie Drobnic Holan
With 2010 coming to a close, President Obama brokered a major deal on taxes, agreeing to continue the current tax rates for high earners. He said repeatedly during the campaign that he intended to let them expire. The tax rates, passed during President George W. Bush's administration, were set to go up in 2011.
That would also have meant higher taxes on investment income such as capital gains and dividends. During the campaign, Obama said he wanted higher taxes for these types of income. The tax compromise Obama signed into law continued the current rates on capital gains for another two years.
We should note that although he gave in on his campaign promise, Obama got some other things in return. The current tax rates were extended for couples who make less than the $250,000 cut-off, and some tax cuts that were part of the 2009 economic stimulus law were also continued. Additionally, Obama won another year of unemployment benefits for workers who qualified, and he won a one-year reduction of Social Security taxes, putting 2 percent of pay back into workers' paychecks.
Obama said he still opposed keeping the same tax rates for the wealthy, even though he agreed to the extension.
"I'm as opposed to the high-end tax cuts today as I've been for years," Obama said in a press conference on Dec. 7, 2010. "In the long run, we simply can't afford them. And when they expire in two years, I will fight to end them, just as I suspect the Republican Party may fight to end the middle-class tax cuts that I've championed and that they've opposed."
There's a case to be made that Obama is not completely backing off his campaign promises. He agreed to only a two-year extension of the rates, not making them permanent.
However, this promise was part of a major campaign theme of Obama's to increase taxes on high earners. The tax rates are now scheduled to expire at the end of 2012, just as Obama completes his first term. At that time, we'll revisit this promise to see where it stands. For now we rate it Promise Broken.
That would also have meant higher taxes on investment income such as capital gains and dividends. During the campaign, Obama said he wanted higher taxes for these types of income. The tax compromise Obama signed into law continued the current rates on capital gains for another two years.
We should note that although he gave in on his campaign promise, Obama got some other things in return. The current tax rates were extended for couples who make less than the $250,000 cut-off, and some tax cuts that were part of the 2009 economic stimulus law were also continued. Additionally, Obama won another year of unemployment benefits for workers who qualified, and he won a one-year reduction of Social Security taxes, putting 2 percent of pay back into workers' paychecks.
Obama said he still opposed keeping the same tax rates for the wealthy, even though he agreed to the extension.
"I'm as opposed to the high-end tax cuts today as I've been for years," Obama said in a press conference on Dec. 7, 2010. "In the long run, we simply can't afford them. And when they expire in two years, I will fight to end them, just as I suspect the Republican Party may fight to end the middle-class tax cuts that I've championed and that they've opposed."
There's a case to be made that Obama is not completely backing off his campaign promises. He agreed to only a two-year extension of the rates, not making them permanent.
However, this promise was part of a major campaign theme of Obama's to increase taxes on high earners. The tax rates are now scheduled to expire at the end of 2012, just as Obama completes his first term. At that time, we'll revisit this promise to see where it stands. For now we rate it Promise Broken.
Sources:
No. 3: Eliminate capital gains taxes for small businesses and start-ups
"Barack Obama understands that small businesses are the engines of our economy, and he will eliminate all capital gains taxes on investments in small and start-up firms."
Thomas, HR 4583
The White House, Press Conference by the President, Dec. 7, 2010
U.S. Senate Finance Committee, S.A.4753: The Reid-McConnell Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010
No. 2: Eliminate all oil and gas tax loopholes
"Eliminating special tax breaks for oil and gas companies: including repealing special expensing rules, foreign tax credit benefits, and manufacturing deductions for oil and gas firms."
Changes to oil and gas taxes make Obama's budget
Updated: Tuesday, March 10th, 2009 | By Angie Drobnic Holan
President Obama proposed many changes to the U.S. tax code when running for office, including eliminating oil and gas tax loopholes.
When he unveiled his first budget outline on Feb. 26, 2009, he included a number of measures that would revoke tax advantages for oil companies.
The budget outline calls for nine different measures under the category "Eliminate oil and gas company preferences." Among other things, the outline says the Obama administration will "levy excise tax on Gulf of Mexico oil and gas (limits excess royalty relief)," "repeal enhanced oil recovery credit," "repeal marginal well tax credit," "repeal expensing of intangible drilling costs," and "repeal deduction for tertiary injectants."
The Obama administration estimates that over 10 years, the changes would generate $30 billion in additional revenue. (That sounds like a lot, but it's a small amount compared with Obama's $400 "Making Work Pay" tax credit for workers, which will cost $536 billion over 10 years.)
Obama's budget still needs to get through Congress. We also weren't able to tell from the outline whether these measures would affect foreign tax credit benefits for oil companies, though it does specifically mention repealing the manufacturing tax deduction and expensing rules. The Obama administration plans to release more budget details in April 2009. For now, we rate this promise In the Works.
When he unveiled his first budget outline on Feb. 26, 2009, he included a number of measures that would revoke tax advantages for oil companies.
The budget outline calls for nine different measures under the category "Eliminate oil and gas company preferences." Among other things, the outline says the Obama administration will "levy excise tax on Gulf of Mexico oil and gas (limits excess royalty relief)," "repeal enhanced oil recovery credit," "repeal marginal well tax credit," "repeal expensing of intangible drilling costs," and "repeal deduction for tertiary injectants."
The Obama administration estimates that over 10 years, the changes would generate $30 billion in additional revenue. (That sounds like a lot, but it's a small amount compared with Obama's $400 "Making Work Pay" tax credit for workers, which will cost $536 billion over 10 years.)
Obama's budget still needs to get through Congress. We also weren't able to tell from the outline whether these measures would affect foreign tax credit benefits for oil companies, though it does specifically mention repealing the manufacturing tax deduction and expensing rules. The Obama administration plans to release more budget details in April 2009. For now, we rate this promise In the Works.
Sources:
Office of Budget and Management, Budget Documents for Fiscal Year 2010 , Feb. 26, 2009
Office of Budget and Management, Summary Tables , Table S-6, page 122, Feb. 26, 2009
Office of Budget and Management, Summary Tables , Table S-6, page 122, Feb. 26, 2009
No. 3: Eliminate capital gains taxes for small businesses and start-ups
"Barack Obama understands that small businesses are the engines of our economy, and he will eliminate all capital gains taxes on investments in small and start-up firms."
A short-term fix
Updated: Friday, December 10th, 2010 | By Patrick Kennedy
During the 2008 campaign, Barack Obama laid out a strategy for economic recovery that included targeted tax breaks aimed at spurring job creation, particularly by aiding small businesses. One of those small business tax breaks that Obama proposed was the complete elimination of capital gains taxes on investments in "small and start up firms”.
Capital gains taxes are taxes on profits made on the sale of an asset. Rates vary mainly depending on the type of asset sold and how long the asset has been held, with higher rates for assets held less than a year. When Obama took office, investors were allowed to exclude from taxation 50% of the profit made from putting money into small business.
We last checked on this promise in February, 2009, and rated it "In the Works” because of progress made under the American Recovery and Reinvestment Act, better known as the stimulus. A provision tucked into the act raised the percentage of small business investment excluded from capital gains tax from 50% to 75%. That provision was to be in effect for the 2009 and 2010 tax years.
Eighteen months later, Obama and House Democrats sought to increase the exclusion as part of small business legislation they labored to get through Congress during the summer of 2010. The finished product, the Small Business Jobs Act of 2010, signed by the president Sept. 27, 2010, went further -- but with some limitations.
First, the elimination of capital gains tax on small business investment applies only to investments held for five years. What's more, the exemption only applies to investments made from the bill's enactment through the end of 2010. On Jan. 1, 2011, the exemption goes back to the pre-stimulus level of 50%.
"He kept his promise, but we don't think it will help many small businesses”, said Melissa Sharp, a spokeswoman for the National Federation of Independent Business.
Sharp's contention is that by limiting the tax break to investments to one type of small business, C-Corporations, with less than $50 million in assets, that much of the provision's usefulness is curbed. She said that less than 25% of small businesses are eligible under those rules.
Those who crafted the bill claim that the tax break appropriately targets those who would benefit from the exclusion, that most ineligible businesses are operations such as restaurants and doctor's offices that wouldn't necessarily be making significant investments subject to capital gains taxation.
Nonetheless, we're focused on whether Obama fulfilled the promise he made on the campaign trail more than two years ago. Since the law effectively eliminates capital gains taxation for some small businesses, but only for investments made before the end of 2010, we rate this as a Compromise for the White House.
Capital gains taxes are taxes on profits made on the sale of an asset. Rates vary mainly depending on the type of asset sold and how long the asset has been held, with higher rates for assets held less than a year. When Obama took office, investors were allowed to exclude from taxation 50% of the profit made from putting money into small business.
We last checked on this promise in February, 2009, and rated it "In the Works” because of progress made under the American Recovery and Reinvestment Act, better known as the stimulus. A provision tucked into the act raised the percentage of small business investment excluded from capital gains tax from 50% to 75%. That provision was to be in effect for the 2009 and 2010 tax years.
Eighteen months later, Obama and House Democrats sought to increase the exclusion as part of small business legislation they labored to get through Congress during the summer of 2010. The finished product, the Small Business Jobs Act of 2010, signed by the president Sept. 27, 2010, went further -- but with some limitations.
First, the elimination of capital gains tax on small business investment applies only to investments held for five years. What's more, the exemption only applies to investments made from the bill's enactment through the end of 2010. On Jan. 1, 2011, the exemption goes back to the pre-stimulus level of 50%.
"He kept his promise, but we don't think it will help many small businesses”, said Melissa Sharp, a spokeswoman for the National Federation of Independent Business.
Sharp's contention is that by limiting the tax break to investments to one type of small business, C-Corporations, with less than $50 million in assets, that much of the provision's usefulness is curbed. She said that less than 25% of small businesses are eligible under those rules.
Those who crafted the bill claim that the tax break appropriately targets those who would benefit from the exclusion, that most ineligible businesses are operations such as restaurants and doctor's offices that wouldn't necessarily be making significant investments subject to capital gains taxation.
Nonetheless, we're focused on whether Obama fulfilled the promise he made on the campaign trail more than two years ago. Since the law effectively eliminates capital gains taxation for some small businesses, but only for investments made before the end of 2010, we rate this as a Compromise for the White House.
Sources:
Barack Obama campaign site, "Barack Obama"s Comprehensive Tax Plan”
Interview: Melissa Sharp, National Federation of Independent Business, November 9
Speaker of the House Web site, "Small Business Jobs Act”
White House Blog, "President Obama Signs Small Business Jobs Act - Learn What"s In It, Sept. 27, 2010
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