Obama's Budget: a Romney Rule, the Buffett Rule and Corporate 'Tax Reform'

     The one thing you have to say about the President's budget is that there are a lot of moving parts to it. Chained CPI is getting a of ink, unsurprisingly; however there's a lot to chew on. With a proposed 'Romney Rule' he proposes to do something about carried interest. To call it Romney's rule is fitting as Romney was the candidate with the Magic IRA that somehow fit $100 million into what's supposed to have a much lower limit:

    "President Obama’s budget calls for preventing wealthy people — such as, cough, Mitt Romney — from deferring taxation on vast sums of money by circumventing laws that limit the amount of money people are allowed to contribute to individual retirement accounts."

    "Per the budget, “Individual Retirement Accounts and other tax-preferred savings vehicles are intended to help middle class families save for retirement. But under current rules, some wealthy individuals are able to accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving.”

    "But how would they close this loophole?"

    "One way experts believe financial managers avoid the current annual contribution limit to IRAs is by using IRAs to participate in investments and assigning those investment interests a nominal value vastly below fair market."

    "Obama wouldn’t curb this practice directly. Instead his budget calls for an overall cap of about $3 million on the net balance across all of an individuals’ tax-preferred accounts. Only have one IRA? It can hold $3 million. Have three? Their holdings must sum to $3 million or less."

   "By limiting the extent to which wealthy people can skirt the current annual limits and thus hide money from the IRS, the administration expects such a rule would raise $9 billion over 10 years."

    "Fortunately for Romney himself, the rule probably won’t become law anytime soon. And even if it did, according to the Treasury Department, it wouldn’t take effect until the beginning of next year and then only apply to contributions and accruals thereafter."

     http://tpmdc.talkingpointsmemo.com/2013/04/how-obama-wants-to-prevent-future-mitt-romneys-from-sheltering-massive-amounts-of-wealth-from-taxati.php?ref=fpa

     Obama also has proposed the Buffett Rule-a 30% minimum tax for multimillionaires and 'corporate tax reform.' I'm very careful about this idea which is why I use scare quotes. Don't know if I love this idea of lowering the corporate tax rate from 35% to 28%; the idea is to close enough loopholes to make it revenue neutral: according to teh Administration it will actually even be slightly revenue positive. 

    The administration also formally proposed what it calls the Buffett Rule, a new 30% minimum tax for households making more than $1 million. That would generate an additional $53 billion. It also proposes revisiting a deal on the estate tax worked out in the fiscal-cliff compromise, and raising estate-tax levels starting in 2018.

   "In a step toward a corporate-tax overhaul, the budget for the first time segregates a set of revenue-raising provisions that could be used to lower the corporate tax rate, now 35%, the highest statutory rate in the world. This pool of provisions would generate about $100 billion over 10 years, enough to lower the corporate rate by about one percentage point."

     http://online.wsj.com/article/SB10001424127887324240804578414531935949070.html

     It grates on me every time I hear about how the U.S. corporate tax is the "highest in the world"-the article qualifies with "statutory" but how many times have we heard this claim made without this qualifier? Still if it really is actually revenue positive that's obviously worth looking at. The Administration is also very clear that this is not a stand alone offer where GOPers can pick off what they like, ignore things they don't-like the Buffett Rule.

    "A senior administration official, however, emphasized that an overhaul of the corporate tax code is hard to do without considering the individual income tax code, and an overhaul of the individual tax code is tough to contemplate except as part of a broader deficit deal."

  

  "The budget also proposes a change in the taxation of sophisticated financial instruments called derivatives to raise about $19 billion over 10 years. The proposal echoes one floated recently by House Ways and Means Chairman Dave Camp (R., Mich.), a notion that ruffled feathers on Wall Street."

     That idea of Camp's may also be something that many liberals will like. Overall, while there are some things many liberals won't like there are also plenty to like. Another thing: higher cigarette taxes. 

       I think this budget is going to prove to have been a great starting point. Headlines like the front page of today's WSJ Proposed Entitlement Curbs Aimed at Compromise: GOP Leaders Dismiss Plan I think play right into his hands. As David Wessell put it the one thing you can't say about this year's Obama budget is that it's too bland.

        http://online.wsj.com/article/SB10001424127887324010704578414740805425034.html