AJC
Revenue plans in the 2014 Obama budget
As the White House leaked out information about the 2014 budget plan from President Obama, the figure of $580 billion in "net" tax hikes caught my attention - and sure enough, when the plan was released on Wednesday, it was clear that much more than $580 billion in new revenues would come into Uncle Sam over ten years under this budget.
Really, the true number in terms of tax revenue increases is $1 trillion over ten years, as the President's plan includes an assortment of tax plans, many of them which have been rejected or not considered at all by the Congress in previous budgets.
For example, the biggest item on the revenue side is the limit on deductions for higher income earning taxpayers, which would bring in over $529 billion in ten years; that idea has fallen flat when Democrats ran the Congress in the first two years of the Obama Administration and has gone nowhere with Republicans in charge of the House as well.
Since I know very few of you will go through all the proposals in the budget, here is a list of the revenue proposals made for 2014 by the President. Any figures with a minus (-) sign mean that the provision will lose money. All the figures are in millions of dollars, so if you see 1,000, that translates to $1 billion.
You can read all about the following proposals and see all the documentation for yourself at http://www.treasury.gov/resource-center/tax-policy/Documents/General-Explanations-FY2014.pdf
| Incentives for manufacturing, research, clean energy, and insourcing and creating jobs: | |
| Provide tax incentives for locating jobs and business activity in the United States and remove tax deductions for shipping jobs overseas | 112 |
| Provide new Manufacturing Communities Tax Credit | -4,411 |
| Enhance and make permanent the research and experimentation tax credit | -99,378 |
| Extend certain employment tax credits including incentives for hiring veterans | -9,086 |
| Provide a tax credit for the production of advanced technology vehicles | -4,212 |
| Provide a tax credit for medium- and heavy-duty alternative-fuel commercial vehicles | -2,056 |
| Modify and permanently extend renewable electricity production tax credit 3/ | -17,443 |
| Modify and permanently extend the deduction for energy-efficient commercial building property | -5,222 |
| Subtotal, incentives for manufacturing, research, clean energy, and insourcing and creating jobs | -141,920 |
| Tax relief for small business: | |
| Extend increased expensing for small business | -68,661 |
| Eliminate capital gains taxation on investments in small business stock | -5,810 |
| Double the amount of expensed start-up expenditures | -2,963 |
| Expand and simplify the tax credit provided to qualified small employers for non-elective contributions to employee health insurance | -10,496 |
| Subtotal, tax relief for small business ... | -87,930 |
| Incentives to promote regional growth: | |
| Extend and modify the New Markets Tax Credit ... | -7,363 |
| Restructure assistance to New York City, provide tax incentives for transportation infrastructure | -2,000 |
| Modify tax-exempt bonds for Indian tribal governments | -304 |
| Reform and expand the Low-Income Housing Tax Credit (LIHTC): | |
| Allow states to convert private activity bond volume cap into LIHTCs that the state can allocate.. | -900 |
| Encourage mixed income occupancy by allowing LIHTC-supported projects to elect a criterion employing a restriction on average income | Negligible revenue effect |
| Change formulas for 70 percent PV and 30 percent PV LIHTCs | -59 |
| Add preservation of federally assisted affordable housing to allocation criteria | Negligible revenue effect |
| Make the LIHTC beneficial to real estate investment trusts (REITs) | -428 |
| Subtotal, reform and expand LIHTC ... | -1,387 |
| Subtotal, incentives to promote regional growth | -10,870 |
| Reform U.S. international tax system: | |
| Defer deduction of interest expense related to deferred income of foreign subsidiaries | 36,520 |
| Determine the foreign tax credit on a pooling basis ... | 65,752 |
| Tax currently excess returns associated with transfers of intangibles offshore | 24,005 |
| Limit shifting of income through intangible property transfers | 2,108 |
| Disallow the deduction for non-taxed reinsurance premiums paid to affiliates | 6,209 |
| Limit earnings stripping by expatriated entities . | 4,658 |
| Modify tax rules for dual capacity taxpayers | 10,964 |
| Tax gain from the sale of partnership interest on look-through basis | 2,656 |
| Prevent use of leveraged distributions from related foreign corporations to avoid dividend treatment ... | 3,243 |
| Extend section 338(h)(16) to certain asset acquisitions | 960 |
| Remove foreign taxes from a section 902 corporation's foreign tax pool when earnings are eliminated . | 389 |
| Subtotal, reform U.S. international tax system | 157,464 |
| Reform treatment of financial and insurance industry institutions and products: | |
| Require that derivative contracts be marked to market with resulting gain or loss treated as ordinary . | 18,889 |
| Modify rules that apply to sales of life insurance contracts | 641 |
| Modify proration rules for life insurance company general and separate accounts | 5,101 |
| Expand pro rata interest expense disallowance for corporate-owned life insurance | 5,919 |
| Subtotal, reform treatment of financial and insurance industry institutions and products | 30,550 |
| Eliminate fossil fuel preferences: | |
| Eliminate oil and gas preferences: | |
| Repeal enhanced oil recovery credit | 0 |
| Repeal credit for oil and gas produced from marginal wells | 0 |
| Repeal expensing of intangible drilling costs | 10,993 |
| Repeal deduction for tertiary injectants | 107 |
| Repeal exception to passive loss limitation for working interests in oil and natural gas properties | 74 |
| Repeal percentage depletion for oil and natural gas wells | 10,723 |
| Repeal domestic manufacturing deduction for oil and natural gas production | 17,447 |
| Increase geological and geophysical amortization period for independent producers to seven years | 1,363 |
| Subtotal, eliminate oil and gas preferences | 40,707 |
| Eliminate coal preferences: | |
| Repeal expensing of exploration and development costs | 432 |
| Repeal percentage depletion for hard mineral fossil fuels | 1,982 |
| Repeal capital gains treatment for royalties | 432 |
| Repeal domestic manufacturing deduction for production of coal and other hard mineral fossil fuels | 409 |
| Subtotal, eliminate coal preferences | 3,255 |
| Subtotal, eliminate fossil fuel preferences | 43,962 |
| Other revenue changes and loophole closers: | |
| Repeal the excise tax credit for distilled spirits with flavor and wine additives | 1,093 |
| Repeal last-in, first-out method of accounting for inventories . | 80,822 |
| Repeal lower-of-cost-or-market inventory accounting method .. | 7,172 |
| Modify depreciation rules for general aviation passenger aircraft | 2,702 |
| Repeal gain limitation for dividends received in reorganization exchanges | 2,702 |
| Expand the definition of built-in loss for purposes of partnership loss transfers | 73 |
| Extend partnership basis limitation rules to nondeductible expenditures | 948 |
| Limit the importation of losses under related party loss limitation rules | 879 |
| Deny deduction for punitive damages . | 372 |
| Eliminate section 404(k) employee stock ownership plan dividend deduction for large C corporations ... | 6,577 |
| Subtotal, other revenue changes and loophole closers | 103,340 |
| Total, Reserve for Revenue-Neutral Business Tax Reform | 94,596 |
| Total receipt effect | 104,654 |
| Total outlay effect | 10,058 |
| Tax relief to create jobs and jumpstart growth: | |
| Provide small businesses a temporary 10-percent tax credit for new jobs and wage increases | -25,797 |
| Provide additional tax credits for investment in qualified property used in a qualifying advanced energy manufacturing project | -1,827 |
| Designate Promise Zones | -5,376 |
| Subtotal, tax relief to create jobs and jumpstart growth | -33,000 |
| Incentives for investment in infrastructure: | |
| Provide America Fast Forward Bonds | 1 |
| Allow eligible use of America Fast Forward Bonds to include financing all qualified privateactivity bond categories | -234 |
| Increase the Federal subsidy rate for America Fast Forward Bonds for school construction 3/ | -10,191 |
| Allow current refundings of State and local governmental bonds 4/ | 0 |
| Repeal the $150 million nonhospital bond limitation on qualified 501(c)(3) bonds | -100 |
| Increase national limitation amount for qualified highway or surface freight transfer facility bonds | -515 |
| Eliminate the volume cap for private activity bonds for water infrastructure | -258 |
| Increase the 25-percent limit on land acquisition restriction on qualified private activity bonds ... | -176 |
| Allow more flexible research arrangements for purposes of private business use limits | -16 |
| Repeal the governmental ownership requirement for certain types of exempt facility bonds | -3,764 |
| Exempt foreign pension funds from the application of Foreign Investment in Real Property Tax Act .... | -2,168 |
| Subtotal, incentives for investment in infrastructure | -17,421 |
| Tax cuts for families and individuals: | |
| Provide for automatic enrollment in IRAs, including a small employer tax credit, and double the tax credit for small employer plan start-up costs 3/ | -17,626 |
| Expand the child and dependent care tax credit 3/ | -8,775 |
| Extend exclusion from income for cancellation of certain home mortgage debt | -2,610 |
| Provide exclusion from income for student loan forgiveness for students in certain income-based or income-contingent repayment programs who have completed payment obligations . | -2 |
| Provide exclusion from income for student loan forgiveness and for certain scholarship amounts for participants in the Indian Health Service Health Professions Programs | -155 |
| Subtotal, tax cuts for families and individuals | -29,168 |
| Upper-income tax provisions: | |
| Reduce the value of certain tax expenditures | 529,261 |
| Implement the Buffet Rule by imposing a new "Fair Share Tax" | 53,387 |
| Subtotal, upper-income tax provisions | 582,648 |
| Modify estate and gift tax provisions: | |
| Restore the estate, gift, and generation-skipping transfer (GST) tax parameters in effect in 2009 | 71,693 |
| Require consistency in value for transfer and income tax purposes | 1,896 |
| Require a minimum term for grantor retained annuity trusts | 3,894 |
| Limit duration of GST tax exemption | Negligible revenue effect |
| Coordinate certain income and transfer tax rules applicable to grantor trusts | 1,087 |
| Extend the lien on estate tax deferrals provided under section 6166 | 160 |
| Clarify GST tax treatment of Health and Education Exclusion Trusts | -171 |
| Subtotal, modify estate and gift tax provisions | 78,559 |
| Reform treatment of financial industry institutions and products: | |
| Impose a financial crisis responsibility fee | 59,349 |
| Require current inclusion in income of accrued market discount and limit the accrual amount for distressed debt | 1,226 |
| Require that the cost basis of stock that is a covered security must be determined using an average cost basis method . | 2,069 |
| Subtotal, reform treatment of financial industry institutions and products | 62,644 |
| Other revenue changes and loophole closers: | |
| Increase the Oil Spill Liability Trust Fund financing rate by one cent and update the law to include other sources of crudes | 1,058 |
| Reinstate and extend Superfund excise taxes | 8,032 |
| Reinstate Superfund environmental income tax | 12,173 |
| Increase tobacco taxes and index for inflation | 78,091 |
| Make unemployment insurance surtax permanent | 15,155 |
| Provide short-term tax relief to employers and expand Federal Unemployment Tax Act base ... | 51,481 |
| Tax carried (profits) interests as ordinary income | 15,909 |
| Eliminate the deduction for contributions of conservation easements on golf courses | 619 |
| Restrict deductions and harmonize the rules for contributions of conservation easements for historic preservation | 234 |
| Require non-spouse beneficiaries of deceased IRA owners and retirement plan participants to take inherited distributions over no more than five years | 4,911 |
| Limit the total accrual of tax-favored retirement benefits | 9,342 |
| Subtotal, other revenue changes and loophole closers | 197,005 |
| Reduce the tax gap and make reforms: | |
| Expand information reporting: | |
| Require information reporting for private separate accounts of life insurance companies | 7 |
| Require a certified TIN from contractors and allow certain withholding | 1,264 |
| Modify reporting of tuition expenses and scholarships on Form 1098-T 3/ | 1,095 |
| Subtotal, expand information reporting | 2,366 |
| Improve compliance by businesses: | |
| Require greater electronic filing of returns | No revenue effect |
| Make e-filing mandatory for exempt organizations | No revenue effect |
| Authorize the Department of the Treasury to require additional information to be included in electronically filed Form 5500 Annual Reports and electronic filing of certain other employee benefit plan reports | No revenue effect |
| Implement standards clarifying when employee leasing companies can be held liable for their clients' Federal employment taxes | 69 |
| Increase certainty with respect to worker classification | 9,097 |
| Repeal special estimated tax payment provision for certain insurance companies | Negligible revenue effect |
| Subtotal, improve compliance by businesses | 9,166 |
| Strengthen tax administration: | |
| Impose liability on shareholders participating in "Intermediary Transaction Tax Shelters" to collect unpaid corporate income taxes | 4,947 |
| Increase levy authority for payments to Medicare providers with delinquent tax debt | 707 |
| Implement a program integrity statutory cap adjustment for tax administration | 46,502 |
| Streamline audit and adjustment procedures for large partnerships | 1,873 |
| Revise offer-in-compromise application rules | 10 |
| Expand IRS access to information in the National Directory of New Hires for tax administration purposes | No revenue effect |
| Make repeated willful failure to file a tax return a felony | 10 |
| Facilitate tax compliance with local jurisdictions | 15 |
| Extend statute of limitations where State adjustment affects Federal tax liability | 29 |
| Improve investigative disclosure statute | 10 |
| Require taxpayers who prepare their returns electronically but file their returns on paper to print their returns with a 2-D bar code | No revenue effect |
| Allow the IRS to absorb credit and debit card processing fees for certain tax payments | 19 |
| Extend IRS math error authority in certain circumstances 3/ | 185 |
| Impose a penalty on failure to comply with electronic filing requirements | 10 |
| Restrict access to the Death Master File 3/ | 1,303 |
| Provide whistleblowers with protection from retaliation | Negligible revenue effect |
| Provide stronger protection from improper disclosure of taxpayer information in whistleblower actions | No revenue effect |
| Index all penalties to inflation | 10,759 |
| Extend paid preparer EITC due diligence requirements to the child tax credit | Negligible revenue effect |
| Extend IRS authority to require truncated SSN on Form W-2 | Negligible revenue effect |
| Add tax crimes to the Aggravated Identity Theft Statute | Negligible revenue effect |
| Impose a civil penalty on tax identity theft crimes | Negligible revenue effect |
| Subtotal, strengthen tax administration | 66,379 |
| Subtotal, reduce the tax gap and make reforms | 77,911 |
| Simplify the tax system: | |
| Simplify the rules for claiming the EITC for workers without qualifying children 3/ | -5,389 |
| Modify adoption credit to allow tribal determination of special needs | -5 |
| Eliminate minimum required distribution rules for IRA/plan balances of $75,000 or less | -222 |
| Allow all inherited plan and IRA balances to be rolled over within 60 days | Negligible revenue effect |
| Repeal non-qualified preferred stock designation | 361 |
| Repeal preferential dividend rule for publicly offered REITs | Negligible revenue effect |
| Reform excise tax based on investment income of private foundations | -54 |
| Remove bonding requirements for certain taxpayers subject to Federal excise taxes on distilled spirits, wine and beer | Negligible revenue effect |
| Simplify arbitrage investment restrictions | -1174 |
| Simplify single-family housing mortgage bond targeting requirements | -15 |
| Streamline private business limits on governmental bonds | -274 |
| Exclude self-constructed assets of small taxpayers from the Uniform Capitalization rules | -799 |
| Repeal technical terminations of partnerships | 183 |
| Repeal anti-churning rules of section 197 . | -2,323 |
| Subtotal, simplify the tax system | -8,900 |
| User fee: | |
| Reform inland waterways funding | 1,100 |
| Subtotal, user fee | 1,100 |
| Other initiatives: | |
| Allow offset of Federal income tax refunds to collect delinquent state income taxes for out-of-state residents | No revenue effect |
| Authorize the limited sharing of business tax return information to improve the accuracy of important measures of the economy | No revenue effect |
| Eliminate certain reviews conducted by the U.S. Treasury Inspector General for Tax Administration | No revenue effect |
| Modify indexing to prevent deflationary adjustments | No revenue effect |
| Replace the CPI with the chained CPI for purposes of indexing tax provisions for inflation | 100,000 |
| Subtotal, other initiatives | 100,000 |
| Total, FY 2014 Budget Proposals | 1,011,378 |
| Total receipt effect | 1,111,185 |
| Total outlay effect | 99,807 |
As the White House leaked out information about the 2014 budget plan from President Obama, the figure of $580 billion in "net" tax hikes caught my attention - and sure enough, when the plan was released on Wednesday, it was clear that much more than $580 billion in new revenues ...
