While President Barack Obama is proposing to cut some taxes for companies that hire workers, his budget would raise a host of other taxes on businesses and wealthy individuals.
The budget proposal released Monday would extend Obama's signature Making Work Pay tax credit — $400 for individuals, $800 for a couple filing jointly — through 2011. But it would also impose nearly $1 trillion in higher taxes on couples making more than $250,000 and individuals making more than $200,000 by not renewing tax cuts enacted under former President George W. Bush. Obama would extend Bush-era tax cuts for families and individuals making less.
Obama revived numerous proposals for business tax increases that didn't fare well in Congress last year, including a scaled-down plan to increase taxes on U.S. companies with major overseas operations, and plans to increase taxes on oil and gas companies.
Congressional Democrats praised most of Obama's initiatives, but their lukewarm response to some of the tax increases suggests a tough fight for the administration. Obama's proposal to increase taxes on international businesses would be better addressed as part of a package overhauling the entire tax system, said Sen. Max Baucus, D-Mont., chairman of the tax-writing Finance Committee.
Rep. Dave Camp of Michigan, the top Republican on the tax-writing House Ways and Means Committee, said, "This budget features too many new taxes, too much new spending and too much new debt."
The budget accounts for a $33 billion tax cut that Obama wants Congress to include in a new jobs bill. It would give companies a $5,000 tax credit for each new worker they hire in 2010. Businesses that increase wages or hours for their current workers in 2010 would be reimbursed for the extra Social Security payroll taxes they would pay.
The tax increases on wealthy families would fulfill a campaign pledge by Obama, who has blamed Bush's tax cuts and Medicare prescription drug program for swelling the government's debt by $7.5 trillion.
"While we extend middle-class tax cuts in this budget, we will not continue costly tax cuts for oil companies, investment fund managers and those making over $250,000 a year," Obama said. "We just can't afford it."
Obama would permanently expand the Earned Income Tax Credit, a popular anti-poverty program, for low-income families with three or more children, at a cost of $15 billion over the next decade. However, he would save $760 million by eliminating advanced payments of the credit, a little-used aspect of the program in which families receive payments throughout the year instead of a lump sum at tax time.
"I am a big supporter of the Earned Income Tax Credit," Obama said. "The problem is 80 percent of the people who got this advance didn't comply with one or more of the program's requirements."
The Making Work Pay tax credit provides families with up to $800 a year and individuals up to $400 a year through small increases in their weekly pay. Extending the tax credit through 2011 would save them $61 billion.
Some of Obama's other tax proposals would:
— Raise the top two income tax rates for individuals, from 33 percent and 35 percent, to 36 percent and 39.6 percent, respectively. Unless Congress intervenes, those rates will rise next Jan. 1 when Bush's tax cuts expire. That government would reap $365 billion over the next decade.
— Limit the itemized tax deductions high earners can claim for charitable donations, mortgage interest and state and local taxes, raising about $210 billion for the next decade.
— Increase the top capital gains tax rate from 15 percent to 20 percent for families making more than $250,000 a year and individuals making more than $200,000. The proposal would raise about $105 billion.
— Make the research and experimentation tax credit permanent, saving businesses about $83 billion over the next decade.
— Extend a provision allowing businesses buying equipment such as computers to speed up depreciation through 2010, saving them $20 billion over the next decade.
— Eliminate capital gains taxes on the sale of some small business stocks, as long as they are held for at least five years, saving taxpayers $8 billion over the next decade.
— Impose a "financial crisis responsibility fee" on large financial institutions, raising $90 billion over the next decade.
— Repeal a widely ignored law that taxes the personal use of company-issued cell phones like other fringe benefits, saving taxpayers $2.8 billion over 10 years.
— Restrict the ability of international companies to defer taxes on profits made overseas, raising about $26 billion over the next decade.
— Impose a total of about $39 billion in tax increases on oil, gas and coal companies over the next decade.
— Change the way profits made by investment fund managers are taxed, raising an additional $24 billion over the next decade.