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What's in the Obama tax hike?

February 26, 2009

It looks like the Obama tax increase agenda will be more ambitions than just letting the Bush tax cuts expire. The Wall Street Journal reports:

The tax increases would raise an estimated $318 billion over 10 years by reducing the value of such longstanding deductions as mortgage interest and charitable contributions for people in the highest tax brackets. Households paying income taxes at the 33% and 35% rates can currently claim deductions at those rates. Under the Obama proposal, they could deduct only 28% of the value of those payments.
The changes would be phased in gradually over the next few years. For the 2009 tax year, the 33% tax bracket starts with couples with taxable earnings of $208,850, when adjusted for personal exemptions and various deductible expenses. A taxpayer in the top bracket paying $1,000 of mortgage interest, for example, would see a tax break worth $350 reduced to $280.

I can't wait to see the form we'll use for this.

This will be on top of the increase of the regular tax rate from 35% to 39.5% when the existing tax rates expire in 2011. Capital gain rates will also rise, from 15% to 20%, absent legislation to keep them from rising in 2011. Of course, the way the markets are going, capital gains are largely a theoretical issue.