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LIFO, high-income itemizers targeted in Obama budget

February 27, 2009

When you're spending like that, it has to affect taxes. The Obama budget aims at businesses and higher-income taxpayers to offset some of the projected spending. The Tax Prof has a great summary of the Obama Tax Proposals. Among the revenue raisers:

- Repeal of LIFO inventory method, effective in 2012.
- Require 1099 reporting for rental payments, effective in 2010
- "Reinstate superfund taxes." Is this the stupid AMT surcharge that disappeared in the 1990s?
- Reinstate the 36% and 39.6 brackets repealed in the Bush tax cuts, effective 2011.
- Reinstate the "hidden tax bracket" by phasing out itemized deductions and personal exemptions for high income earners
- Raising the maximum rate on dividends and capital gains to 20%.
- Taxing "carried interests" as ordinary income.
- A vague, but large, increase on taxes of multinationals.

The administration budget also includes some business tax cuts, including an exemption on capital gains for "small" business (small is beautiful in business, but not government, it seems), permanent enactment of the research credit, and expansion of the five-year carryback for net operating losses.

As expected, the bill proposes to make permanent the 2009 version of the estate tax.

Notably missing is any talk of reducing corporation tax rates, to the chagrin of such raving right-wingers like Charlie Rangel who point out the job-killing nature of the corporation tax.

The tax provision of the budget bill are a mishmash of tax ideas that have been floating around Congress for years. They are in no way a reform program, or even a coherent program of rationalizing the existing tax system. We're seeing a continuing of the largely spastic and random tax policies of the past 8 (really 20) years, except with a bias to tax increases rather than tax cuts.

Tags: LIFO.Obama Tax Policy.tax policy.

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