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Obama's Tax Plan: More of the Same

February 15, 2012 — Free Enterprise — By Caroline Harris   Bookmark and Share

Obama’s budget has fallen flat in more ways than one. Yesterday, we documented the widespread disappointment with the president’s failure to address the mounting deficit articulated in the editorial pages of several of the nation’s leading news outlets. The president, it’s noted here, also took the wrong approach on taxes.

Presented with the opportunity to make our tax code more competitive, fair, simpler, compliance-friendly or more pro-growth, the president again reverted to calling for tax increases on America’s job creators. As we note in testimony submitted today to the House Ways and Means Committee, the president’s FY2013 budget would:

Increase the top marginal tax rates, reduce or eliminate itemized deductions, and limit the rate at which the remaining deductions can be taken. Small businesses that operate as pass-through entities would bear a substantial portion of these higher taxes.

Increase taxes on long term capital gains to 20%, up from 15%, and tax dividends at marginal rates as high as 39.6%, up from 15%. Failure to maintain lower, synchronized capital gains and dividends rates discourages efficient capital allocation and decreases fairness.

Double tax the profits American worldwide companies earn abroad, amounting to a $148 billion tax hike that threatens to put American companies at even greater competitive disadvantage.

Impose $41 billion in new taxes on oil and gas companies, which already face some of the highest effective tax rates of any industry sector and which create millions of high paying jobs.

Repeal longstanding accounting methods, such as LIFO and lower of cost or market (LCM) solely to raise tax revenues.

Levy a $61 billion tax on the financial sector, which would constrain commercial lending and capital investment, including much needed lending to small businesses,

Noticeably absent in the president’s budget are tax incentives to help businesses grow. In contrast to the almost $2 trillion in new taxes businesses can expect to face, they would see only $146 billion of tax cuts and incentives, $108 billion of which is attributable to making permanent the research and development (R&D) tax credit.

About the only positive to take away from the president’s budget proposal is that it is highly unlikely to be adopted by Congress. However, with our economy still struggling, we need and expect more.