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

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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