Obama’s 2013 Budget Review – Tax Cuts, Job Stimulus and Small Business Credits

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The Treasury recently released their Greenbook on President Obama’s 2013 budget proposal. The Greenbook explains the Administration’s revenue proposals included in the budget that seek to boost near-term growth; provide permanent middle-class tax relief; encourage onshore investments in manufacturing and insourced jobs; cut taxes for small businesses; add balance to deficit reduction by asking the most fortunate Americans to contribute; and limit incentives for shifting income and assets overseas. Here are the highlights:

Individual Policies

Boost Near-Term Growth and Job Creation by:

  • Extending the two percentage point payroll tax cut through the end of 2012. (See more…)
  • Extending the 100-percent bonus depreciation provision through 2012. (See more…)
  • Providing a 10-percent tax credit for new jobs and payroll increases focused on small business through 2012.
  • Providing tax credits to support domestic clean energy manufacturing.

Provide Permanent Tax Relief for Middle-Class Families by:

  • Making the American Opportunity Tax Credit permanent, providing up to $10,000 per student over four years and $137 billion in additional higher education tax relief over the next 10 years.
  • Permanently expanding the Earned Income Tax Credit (EITC) to support working families.
  • Permanently increasing the tax credit for child and dependent care by up to 75 percent. (See more on the child tax credit for 2012)
  • Improving retirement security by providing for automatic enrollment in IRAs.  (See more on 2012 IRA saver credit)

Ask the Most Fortunate to Contribute to Balanced, Credible Deficit Reduction by:

  • Allowing the 2001 and 2003 tax cuts to expire (including taxing dividends as ordinary income) for households making more than $250,000 per year. 
  • Restoring the estate tax to 2009 levels.

Small Business and Corporate Focused Budget Proposals

Draw Manufacturing Investments to our Shores and Help Onshore Jobs by:

  • Providing tax incentives for locating jobs and business activity in the United States and prohibiting tax deductions for shipping jobs overseas.
  • Creating a new “Manufacturing Communities” tax credit to encourage investments in communities affected by military base closures, plant closures, and mass layoffs.  
  • Focus the domestic production activities deduction on manufacturing, with a larger deduction for advanced manufacturing activities, and disallowing the deduction for oil and other fossil fuel production.
  • Enhancing the research and experimentation (R&E) credit and making it permanent.

Add to the 17 Small Business Tax Cuts the President has Already Signed into Law by:

  • Permanently eliminating the capital gains tax on certain small business investments.
  • Doubling the amount of currently deductible start-up expenditures. 
  • Expanding and simplifying the Small Business Health Care Tax Credit

Limit Incentives to Shift Income and Assets Overseas by:

  • Limiting tax expenditures for the affluent by capping itemized deductions and certain other deductions and income exclusions at 28 percent.
  • Eliminating the carried interest loophole for hedge fund managers and other similar investment service providers.
  • Eliminating a special depreciation loophole for corporate jets.

Source: US Treasury Greenbook PDF

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