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What is President Obama's tax plan?

Gleckman offers a description of what President Barack Obama has pledged to do on tax policy if he is reelected president in November.

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Kevin Lamarque/Reuters
A staff member keeps the entry curtain closed before President Barack Obama takes the stage to speak at a campaign rally in Tampa, Florida Thursday. Gleckman offers an explanation of President Obama's tax plan.

After all the promises and finger-pointing, the presidential campaign is nearly over. But since the race has shed more heat than light on how each of the candidates would govern, I thought it would be useful to describe exactly what Barack Obama and Mitt Romney 丑补惫别听if elected on Nov. 6. 聽I鈥檒l describe Romney鈥檚 agenda next week but to start, here is聽:

The elevator speech:聽Obama would retain the current individual income tax system, but raise taxes on high-income households to help reduce the budget deficit. 聽He鈥檇 lower corporate tax rates but make it harder for multinationals to avoid U.S. tax on their foreign income.

Obama has had relatively little new to say on taxes through the campaign, with nearly all of his agenda described in the 2013 budget he released last February. 听听

The details:

2001-2010 Tax Cuts:聽Obama would make nearly all of them permanent, except for individuals making $200,000 or more, or couples making $250,000+.

Taxing the Rich:聽Obama would let the two top tax rates revert to their 2000 levels鈥36 聽and 39.6 percent. He鈥檇 raise rates on capital gains from 15 percent to 20 percent for high-income households, and hike the rate on dividends to 39.6 percent. This would be on top of the scheduled 3.8 percent tax increase on investment income due to take effect next year. He also says no household making more than $1 million should pay a smaller share of their income in taxes than a middle-class family (aka the Buffett rule). However, he has not said how he鈥檇 achieve this. 聽

The payroll tax:聽Obama would allow the 2010 payroll tax cut to expire as scheduled in January. In addition, high-income households are due to pay an additional 0.9 percent Medicare tax starting next year. Like the new 3.8 percent tax on investment income, this extra 0.9 percent Medicare levy is a product of the 2010 Affordable Care Act.

Tax preferences:聽Obama would limit the value of all itemized deductions and some exclusions to 28 percent. Besides the deductions, the cap would apply to preferences such as municipal bond interest and health insurance premiums paid by both employers and the self-employed.聽 He鈥檇 maintain聽聽for refundable credits such as the Earned Income Tax Credit and the Child Tax Credit.

The Alternative Minimum Tax:聽He鈥檇 permanently 鈥減atch鈥 the AMT by continuing to index the levy for inflation. But he would not repeal it.

The estate tax:聽He鈥檇 keep it but exempt the first $3.5 million in estate assets ($7 million for couples). His estate tax rate would be 45 percent. He鈥檇 index the exemption for inflation.

The corporate income tax:聽He鈥檇 cut the corporate rate from 35 percent to 28 percent. He says he鈥檇 accomplish this by scaling back business tax preferences, but has left those targets largely unidentified. He鈥檇 retain the current tax regime for multinational firms, but limit their ability to delay tax by keeping foreign income overseas. Beyond those international tax changes, he has identified only a handful of minor base-broadeners, such as higher taxes on oil and gas producers and owners of corporate jets.

Deficit Reduction: Obama would use both tax hikes and spending cuts to achieve long-term deficit reduction. 聽

If you want to know more, take a look at the Tax Policy Center鈥檚听聽of the Romney and Obama tax proposals, as well at TPC鈥檚 more in-depth analyses of the聽,听, and聽听辫濒补苍蝉.

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