February 9, 2016
President Obama’s FY 2017 Tax Proposals and Green Book
The President proposes new revenue from a menu of tax changes in his FY – 2017 budget request. The total new revenue is $2.6 T. This is 67% higher than the President’s proposed in his budget last year.
New proposals include:
- A repeal of LIFO and LCM methods of accounting.
- A new net investment income tax (NIIT) would expand the 3.8% tax on net investment income of high-earners to reach active income of S corporation shareholders, partners and LLC members, as well as income from sales of business property
- The proposal would also make partners and S corporation shareholders who provide services and materially participate in professional service business subject to self-employment tax. These changes are projected to raise $271.7b over 10 yrs.
- Modify the so-called Cadillac Tax by modifying the threshold above which the tax applies to be equal to the greater of the current law threshold or the average premium for a marketplace gold plan in each state. In December, Congress agreed to postpone implementation of the tax until 2020.
- Make permanent the wind and solar tax incentives, which Congress in December brokered a deal to phase out as part of the omnibus budget deal. The production tax credit, which primarily benefits wind, will be phased out by 2020, and the investment tax credit that goes mostly to solar will fall to zero by 2022 as part of the sweeping tax-and-spending bill enacted last year. The budget calls for those incentives to be made permanent and refundable, a longstanding proposal from the administration.
- The proposed budget would authorize the Pension Benefit Guaranty Corporation to increase premiums for multiemployer plans.
- The proposal would expand and reform child care tax benefits and make the child care tax credit available to more middle-class families. It would triple the maximum child care credit for taxpayers with young children, bringing it up to $3,000 per child.
- A 28 percent limit on most tax deductions and exclusions.
- A tax of seven basis points for U.S. financial firms with assets topping $50 billion and
- Ending the preferential tax rates on carried interest for certain investment fund managers.
- Internal Revenue Service funding would rise 9.3 percent in fiscal year 2017 under President Barack Obama’s proposed budget, which calls for more than $2 billion to bolster taxpayer services and $515 million to improve enforcement activities.
Administration renewed proposals from previous budget proposals to reform U.S. international system and more than doubled its projection of how much changes would raise, to $484b over 10 yrs. The proposal calls for:
- A minimum tax on foreign earnings of U.S. companies of 19 percent with no deferral would generate $350 billion over 10 years. The president has proposed the plan before, but it has never gained traction in Congress.
- A one-time, 14 percent repatriation tax on overseas-accumulated earnings currently sitting abroad.
- The President’s budget also calls for a fee of $10.25 per barrel of oil which is projected to raise $319B over 10 yrs.