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Mon September 19, 2011
Tax Winners And Losers Under Obama's Deficit Plan
Originally published on Mon September 19, 2011 7:20 pm
If enacted, President Obama's deficit-reduction plan would increase tax revenues by about $1.5 trillion over the coming decade. The wealthiest taxpayers could see significantly higher taxes, but the vast majority of Americans would pay less, at least through 2012.
These are some of the groups that could see higher tax bills starting in 2013:
-- Investment fund managers: Obama wants Congress to require investment fund managers to pay at least the same percentage in taxes as middle-income Americans, who currently face ordinary income tax rates of 23 percent to 33 percent.
Investment fund managers typically pay less, as a percentage of their income, because their money comes from gains in investments, which get taxed at just 15 percent. Obama is proposing an approach that has come to be known as the "Warren Buffett rule." That's because billionaire investor Buffett has often said that he pays less in taxes, as a percentage of his income, than his secretary.
-- Individuals making $200,000 or more per year (or $250,000 for couples): The George W. Bush-era temporary tax cuts that help affluent households would be allowed to expire in 2013, and there would be a limit to how many deductions affluent households could take.
-- Corporate-jet owners: They would have to pay a $100-per-flight fee on corporate jets and other turbine-powered planes that use the air traffic control system.
-- Airline passengers: The federal security fees would double from $5 to $10 for a nonstop round-trip flight and triple to $15 by 2017.
-- Energy companies: Obama's plan would limit companies' ability to claim domestic manufacturing deductions for oil and gas drilling. The plan also would eliminate some tax breaks related to coal exploration costs.
These groups will have lower taxes:
-- Wage earners: Workers who have payroll taxes deducted each paycheck. Until last year, wage earners had to put 6.2 percent of their income into payroll taxes for Social Security.
As part of a plan to stimulate the economy, Congress would cut the payroll tax to 4.2 percent for 2011. Unless Congress acts again, the rate will go back up to 6.2 percent. But Obama is calling on lawmakers to lower the payroll tax again, down to 3.1 percent for 2012. That change would be worth $1,550 to a family earning $50,000 a year in wages.
-- Employers: Employers also contribute to Social Security, paying 6.2 percent of each worker's wage. Obama wants lawmakers to reduce the tax on the employers' side to 3.1 percent on the first $5 million in payroll. In addition, he would push the Social Security contribution down to zero for any payroll increases up to $50 million next year for any employer of any size.