Digging deeper into Obama's 'middle class economics' plan
An analysis lays a foundation for debate.听罢丑别听听on the distributional听. His tax cuts primarily benefit low-income single workers and families with children. Households with very high incomes and substantial capital assets would pay more.
A reaction offers some explanation.听罢笔颁鈥檚听听that, overall, the President鈥檚 plan has听听on middle-class Americans. But the Center on Budget and Policy Priorities鈥� Bob听听 TPC鈥檚 assumptions and suggests that different methodology would show the middle class doing better under Obama鈥檚 plan. He notes that TPC does not include unrealized capital gains in its measure of income, thus counts as middle class those with modest cash incomes but big bucks stashed in investment accounts. TPC also fails to include future benefits of Obama鈥檚 plan to make permanent the American Opportunity Tax Credit. Greenstein concludes that Obama鈥檚 plan does 鈥渟ubstantially more for low- and middle-income people than a cursory examination of the TPC tables might suggest.鈥�
When does a retreat equal a failure?听TPC鈥檚 Howard听听the demise of Obama鈥檚 plan to curb Sec. 529 college savings accounts necessarily signals the demise听 of tax听, as some analysts suggest.听 Sure, survival of the 529 accounts shows how tough it is for Congress to curb individual tax preferences. But by examining a little history, such as The Tax Reform Act of 1986, Howard concludes that 鈥渢he survival of these education subsidies does not mean that a rate-cuts-for-base-broadening swap will never be possible. It may mean that lawmakers need to be even more aggressive when it comes to killing off special interest tax breaks.鈥�
Speaking of aggressive: The President鈥檚 budget would tax foreign earnings and offshore profits.听贬颈蝉听听a minimum 19 percent tax on future foreign earnings of US-based companies. He also will include a 14 percent mandatory tax on about $2 trillion in stockpiled offshore profits听 to pay for roads, bridges and other infrastructure projects. His proposal would also impose new curbs on corporate inversions and lower the corporate tax rate from 35 percent to 28 percent, and to 25 percent for manufacturers.
Groundhog Day (again): Extender developments鈥� or, the lack thereof.听The Hill听听鈥�GOP lawmakers鈥on鈥檛 yet have a handle on how to deal with the dozens of鈥� extenders, that were at the center of a big fight just months ago.鈥�
Ohio鈥檚 Governor wants businesses to stay.听Republican听to ditch income taxes for 98 percent of business owners who report their profits as personal income through sole proprietorships or other pass-through firms. They could skip their income taxes if their business has annual sales of less than $2 million. He鈥檇 also increase the state personal exemption for Ohio taxpayers earning $80,000 or less. Kasich would help pay for these tax cuts by raising taxes on cigarettes, business sales in Ohio, and oil and gas obtained through fracking. GOP lawmakers oppose such 鈥渢ax shifting.鈥�
Wisconsin鈥檚 Governor wants to borrow to pay for roads.听Republican Scott Walker will not support a gas tax hike. Instead, the presidential hopeful proposes听to fund transportation projects over the next two years. Some GOP colleagues are skeptical: 鈥淭o continue to just borrow and spend isn't fiscally responsible,鈥� said Assembly Speaker Robin Vos.
Did you bet on the New England Patriots听in last night鈥檚 Superbowl? Congratulations.听Now for the bad news:听Your winnings are taxable. TPC鈥檚 Richard听听at the tax implications of gambling鈥攏early $4 billion was wagered on the game鈥攁nd reminds fans that 鈥渋t is up to the taxpayer to report the fistful of beer-stained twenties brought home from the neighborhood Super Bowl party.鈥�
On the Hill this week鈥μ�Treasury Secretary Jack Lew presents the President鈥檚 budget to the听tomorrow, and to the听听on Thursday. The Senate Finance Committee听听with IRS Commissioner John Koskinen on Tuesday. OMB Director Shaun Donovan will present the fiscal plan听 to the听听on Tuesday. DHHS Secretary Sylvia听听with the Senate Finance panel on Wednesday.
Interested in subscribing to听, the Urban-Brookings听summary of the day鈥檚 tax news?听. If you鈥檇 like to tell us about a new research paper or have any comments about our new feature, write us at dailydeduction@taxpolicycenter.org.
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