President Barack Obama will outline a slew of tax proposals in his 2013 budget on February 13, including a revival of past ideas and some new ones aimed at jump-starting U.S. hiring.
The proposals are his 'wish list' to Congress, which has no obligation to act on them. Indeed, it has acted on few of them in the past several years.
The U.S. tax code, riddled with special-interest deductions favoring select groups, has not been overhauled in 25 years. A revamp is unlikely in an election year, but some analysts say public dismay over taxes and deficits may spur debate in 2013.
Below are major tax ideas Obama will likely propose. Revenue estimates are over a decade unless otherwise noted.
* PAYROLL TAX CUTS. Extending a cut in the worker share of the payroll tax through 2012. The payroll tax funds the Social Security pension program. Lawmakers are working on a deal to renew a two-month extension of the break for 160 million workers before a late February deadline.
* BUSH TAX CUTS. Ending tax cuts in 2013 that were enacted 10 years ago under President George W. Bush for households making more than $250,000 a year, but keeping the lower rates for those who earn less.
The issue must be dealt with by year-end, or taxes on nearly every American will rise. Dealing with this is likely to be postponed until after the November 2012 presidential election.
* CARRIED INTEREST. Forcing private equity managers and some others to pay the 35 percent ordinary income tax rate, instead of the 15 percent capital gains tax rate, on a big chunk of their annual earnings, known as "carried interest."
* BUFFETT RULE. Slapping a new, minimum tax on millionaires, known as the "Buffett rule" after Warren Buffett, chairman of Berkshire Hathaway, who backs it. The rule would ensure people making more than $1 million a year pay at least a 30 percent effective tax rate.
* ITEMIZED DEDUCTIONS CAP. Obama had previously proposed limiting the value of itemized tax deductions and exemptions for individuals earning more than $200,000 a year and families earning more than $250,000. A cap would apply to popular deductions like mortgage interest and healthcare.
* CORPORATE TAX RATE. Obama agrees with much of the business community on one thing: the top 35 percent corporate tax rate is among the world's highest and should come down. Administration officials have said in the past they would like to lower the rate to somewhere in the high 20 percent range.
* INTANGIBLE PROPERTY. Closing a tax loophole that allows U.S. companies to shelter profits overseas from intangible property, like royalties from a drug patent. The White House says this would raise $23 billion in revenue. Obama has proposed a version of this idea before.
* DEDUCTIONS FOR MOVING EXPENSES. Limiting a tax break for moving expenses when a U.S. company ships operations overseas. Obama would give a tax credit of 20 percent for the expense of moving operations back to the United States. The White House says this is revenue neutral and would not add to the deficit.
* MINIMUM OVERSEAS PROFITS TAX. Imposing a minimum tax on overseas profits, and using the revenues to help companies investing in the United States. Business is wary of this idea, fearing it will target business with units in low-tax jurisdictions like the Cayman Islands.
* TIGHTENING "DEFERRAL." Tightening rules that let companies defer taxes on income earned abroad. Corporations could no longer deduct interest expenses on foreign earnings with deferred income taxes. These deductions would have to be deferred, as well. In his 2012 budget, Obama said this change would raise about $38 billion.
* FOREIGN TAX CREDIT POOLING. Requiring that foreign tax credits from dividends paid to a parent company be determined on a pooling basis, not individually. This aims to close what critics call a loophole that lets companies claim more in credits than would be paid in U.S. taxes by manipulating which foreign subsidiaries pay out dividends. Obama's 2012 budget said it could raise $51 billion in revenue from this change.
MANUFACTURING TAX BREAKS
* DOMESTIC PRODUCTION. Doubling the domestic production tax incentive for advanced manufacturers to 18 percent, while eliminating it for oil production, to boost U.S. job creation.
* ADVANCED ENERGY. Proposing an additional $5 billion in advanced energy manufacturing tax credits. The White House says this would leverage $20 billion in clean energy manufacturing.
* HELPING COMMUNITIES. Creating a credit of $6 billion over three years for investments in economic improvement projects in communities hit by major job losses or military base closures.
* OIL AND GAS SUBSIDIES. Repealing several tax subsidies for the energy industry, including the oil and gas well depletion allowance; the domestic manufacturing deduction on oil and gas production; expensing of intangible drilling costs; the tertiary recovery cost deduction; and others.
* CORPORATE JETS. Repealing an accelerated depreciation tax break for corporate jet owners.
* BANK TAX. Obama had previously proposed a "financial crisis responsibility fee" on financial firms with assets exceeding $50 billion. That idea has been morphed into a proposal to tax banks to fund a $5 billion to $10 billion proposal to help U.S. homeowners refinance.
(Reporting By Kim Dixon in Washington; Editing by Kevin Drawbaugh)