Obama Reveals Plan to Raise Revenue for Job-Creation Package
In order to raise revenue to pay for his $447 billion job-creation plan, President Obama is targeting high earners, private equity managers, and oil and gas companies. Obama plans to send Congress the legislative language to enact his plan today.
While some Republicans have signaled that they would be open to some of the proposed tax cuts meant to stimulate the economy and job growth, they have been more skeptical about his plans to increase spending through stipends to state and local governments.
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Obama plans to raise $400 billion for his program by placing a cap on itemized deductions and some exceptions for individuals earning upwards of $200,000 and married couples earning more than $250,000 a year. He would raise another $18 billion by taxing the carried interest, or profits-based compensation, of private equity managers, real estate investors, and venture capitalists the same as if it were ordinary income. Currently such earnings are taxed more lightly as capital gains.
If Obama’s bill is passed, the oil and gas industry would be looking at $40 billion in new taxes over the next decade, according to Obama’s budget director, Jack Lew. The plan would limit the industry’s ability to claim domestic manufacturing deductions for drilling.
Finally, another $3 billion would be raised by changing the depreciation schedule for corporate jets to match the longer depreciation schedule associated with commercial jets.
Republican House Majority Leader Eric Cantor has said that he opposes eliminating the carried interest rate, but noted that he hadn’t seen the specifics of Obama’s plan, and wouldn’t object to tighter restrictions on the illegitimate use of carried interest deductions.
When all is said and done, Obama’s proposal would raise $467 billion in new revenue, more than offsetting the cost of his plan, which could cut payroll taxes for individuals and small businesses, and increase spending on infrastructure and state aid, particularly to modernize schools and help states keep teachers and emergency workers on the job.