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Reviewing the State of the Union Address

By Children’s Home Society of Florida Foundation

In his State of the Union Address last week, President Obama included several tax proposals. He stated his hope that high-income earners pay larger taxes in the future. The President also proposed a substantial number of major tax changes for businesses with international operations.

White House Examples

For example, he restated the “Buffet rule” that asks high income individuals to pay at least as high a rate as that paid by middle-income earners. The President noted, “Right now, because of loopholes and shelters in the Tax Code, a quarter of all millionaires pay lower tax rates than millions of middle-class households.”

The White House also proposed that those with incomes over $1 million pay a minimum tax rate of 30%. Taxpayers with incomes over $1 million will have new limits on deductions for mortgage interest, healthcare expenses, qualified retirement plan contributions and childcare.

The Proposals

Many of the proposals for businesses were outlined in a White House press release on January 25th 2012. These major changes are designed to encourage U.S. companies to maintain their U.S. operations and increase employment here rather than overseas:

1. Overseas Plants – There would not be deductions for moving plants overseas. In addition, there would be a 20% tax credit against the cost of moving jobs from overseas back to the United States.

2. Manufacturing – Those manufacturers who purchase equipment would be able to expense 100% of those purchases. This option also existed in prior years and is expected to encourage building factories in the U.S. rather than abroad.

3. Major Job Losses – Areas that have experienced a closing of a military base or a major factory could qualify for a new investment credit of up to $2 billion. This credit creates incentives for building new plants or factories in depressed areas.

4. Minimum Tax – Corporations could be subject to a new minimum tax on their overseas jobs and profits.

Conclusion

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Filed under: Taxation | Tagged: "Buffet rule", income tax, obama, On the White House Tax Proposals, Reviewing the State of the Union Address | 2 Comments »