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Major Tax Proposals by President Obama and Governor Romney

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Major Federal
    Tax Issues   

     President Barack Obama    

      Governor Mitt Romney     

 




 

Individual Income and Payroll Tax Provisions
Expiring Tax Cuts
2001-2008 Cuts1     Extend except for high-income   
  households2   
Extend all
2009-2010 Cuts3 Make remaining 2009 income tax
cuts permanent3

Allow to expire

Tax Rates and Brackets Allow top two tax rates to revert to pre-2001 levels:
10%   15%   25%   28%  
33%4   36%   39.6%
Make 2001 rate cuts permanent and reduce all rates by 20%:
8%   12%   20%   
22.4%   26.4%   28%  
Tax Rates on Capital Gains and Dividends

 Up to 20% tax on long-term capital gains; 
up to 39.6% tax on dividends    

Exempt capital gains, dividends, 
and interest for households
with AGI below $200,0005;
15% maxiumum rate for others

Taxes on Investment Income Under the Afforable Care Act 2010 Additional 3.8% tax on capital gains and dividends for high-income households6,7 Repeal8
Exemptions, Deductions, Credits, and Other Tax Preferences Limit the value of income exclusions and itemized deductions to 28%9
                            
Reduce or eliminate unspecified tax preferences to replace revenue lost due to rate cuts while also maintaining current progressivity of federal taxes. Romney has suggested capping itemized deductions and other tax preferences and possibly denying them entirely for high-income taxpayers.
Alternative Minimum Tax Index all parameters Repeal
Refundable Credits Maintain current refundable tax credits Allow Obama expansion of refundable credits to expire3 and consider further reductions as part of base-broadening
Other    Impose a “Buffett Rule” tax to ensure that “No household making more than $1 million [pays] a smaller share of their income in   taxes than middle-class families pay.”                                 
Payroll Tax
Temporary Cut in FICA Tax Rate Allow temporary cut to expire after 2012 Allow temporary cut to expire after 2012
Medicare Tax Under the Affordable Care Act of 2010 0.9% tax on earnings for high-income households6 Repeal8
Business Tax Provisions
Top Corporate Tax Rate 35%   28%10 25%
Tax Preferences
                               
1) Increase tax incentives for domestic manufacturing
2) Reduce fossil fuel preferences
3) Impose additional fees on financial and insurance industries
1) Extend for one year of the expensing of capital expenditures and enact a temporary investment tax credit
2) Expand the R&E credit
International Taxation Reform international tax rules to limit benefit of deferral and discourage income shifting 1) Territorial tax system
2) Immediate Repatriation holiday
Other Revenue neutral reduction in corporate rate to 28%; unspecified base broadening10 Broaden the base (unspecified provisions) in exchange for further corporate rate reductions

Estate Tax Provisions

Estate tax Index starting from 2009 law11 Repeal



Last updated: October 25, 2012

Note:
The Tax Policy Center will update this table as new information becomes available.
  1. Most tax cuts enacted between 2001 and 2008 are scheduled to expire in 2013.
  2. Tax cuts would expire for married couples with adjusted gross income (AGI) over $250,000 and others with AGI over $200,000.
  3. Three provisions enacted in the American Recovery and Reinvestment Tax Act of 2009 and extended in 2010 are scheduled to expire in 2013. They include 1) expanded refundability of the Child Tax Credit; 2) increased Earned Income Tax Credit for larger families and married couples; and 3) the American Opportunity tax credit for higher education.   

  4. The president would retain the current 33 percent tax bracket to avoid raising taxes on couples with AGI under $250,000 and others with AGI under $200,000.   
  5. $200,000 for married couples filing jointly, $100,000 for single filers, and $150,000 for heads of household.

  6. High-income households are married couples with AGI over $250,000 and others with AGI over $200,000.
  7. This 3.8% tax would apply to most investment income but only up to the amount by which AGI exceeds relevant threshold ($250,000 for married couples filing jointly and $200,000 for others).

  8. Governor Romney has pledged to repeal the Patient Protection and Affordable Care Act of 2010, presumably including the taxes imposed by the act.
  9. The president proposes to limit all deductions and the following income exclusions:

    a. any tax-exempt state and local bond interest;
    b. employer-sponsored health insurance paid for by employers or with before-tax employee dollars;
    c. health insurance costs of self-employed individuals;
    d. employee contributions to defined contribution retirement plans and individual retirement arrangements;
    e. the deduction for income attributable to domestic production activities;
    f. certain trade and business deductions of employees;
    g. moving expenses;
    h. contributions to health savings accounts and Archer MSAs;
    i. interest on education loans; and
    j. certain higher education expenses.

  10. The president's 2013 budget does not propose to change the top corporate income tax rate. He has proposed reducing that rate from 35% to 28% with offsetting base broadeners but has not offered a specific proposal. (See Other.)
  11. The 2009 estate tax allowed an effective exemption of $3.5 million and imposed a 45% tax on any excess.

Sources:

  1. President Obama: Department of the Treasury, "General Explanations of the Administration’s Fiscal Year 2013 Revenue Proposals." 
                                                 
  2. Governor Romney: "Believe in America: Mitt Romney's Plan for Jobs and Economic Growth." "Tax: Fairer, Flatter, Simpler."

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