WASHINGTON, Sept 19 (Reuters) - President Barack Obama is recommending a long list of U.S. tax law changes, including a proposed new minimum tax on millionaires he termed the “Buffett rule,” named after billionaire investor Warren Buffett.
Obama’s wide-ranging tax and budget proposals, introduced on Monday, immediately drew criticism from Republicans. The proposals will be delivered to a congressional “super committee” that is trying to find by Nov. 23 at least $1.2 trillion in budget savings over the next 10 years.
Some of the ideas represent a principled attempt to reform the U.S. tax code, which has not been thoroughly overhauled in 25 years. Some of the proposals are largely attempts to boost government revenue with new fees and stricter oversight.
The U.S. budget deficit in 2011 is expected to be about $1.3 trillion; the national debt is $14.7 trillion. Addressing these problems requires spending and tax changes, experts say.
Here are some of the tax measures Obama has proposed.
* BUFFETT RULE. The president wants a new, minimum tax on millionaires, to be known as the “Buffett rule.” This idea is supported by Buffett, chairman of the conglomerate Berkshire Hathaway (BRKa.N). The rule would ensure that people making more than $1 million a year should pay at least the same share of their income in taxes as middle-class families pay.
* BUSH TAX CUTS. Deep tax cuts enacted under President George W. Bush in 2001 and 2003 would be allowed to expire at the end of 2012 for households making more than $250,000 a year.
* ITEMIZED DEDUCTIONS CAP. A limit on the value of itemized tax deductions and exemptions for individuals earning more than $200,000 a year and families earning more than $250,000, that would ensure those higher-earning taxpayers get the same benefit as someone in the 28 percent tax bracket. The cap would apply to popular itemized deductions including mortgage interest and charitable donations, foreign excluded income, tax-exempt interest, employer-sponsored health insurance and other items.
* PAYROLL TAX CUTS. Reductions in the payroll tax, which include Social Security deductions, would be extended. Employers’ taxes would be cut in half to 3.1 percent on the first $5 million in payroll. Employees’ payroll taxes would be cut in half to 3.1 percent next year.
* CARRIED INTEREST. Hedge fund and private equity managers would have 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.”
* OVERSEAS CORPORATE PROFITS. A range of tax-avoidance strategies would be targeted. Corporations could no longer deduct interest expenses on foreign earnings with deferred income taxes. These deductions would have to be deferred, as well. Foreign tax credits from dividends paid to a parent company by a foreign subsidiary would have to be determined on a pooling basis, not individually. Excessive shifting of corporate income into low-tax countries would be taxed more strictly. Earnings stripping by foreign entities would be curtailed.
* BUSINESS WRITE-OFFS. Companies could continue to write off 100 percent of the expense of buying new capital equipment.
* HIRING INCENTIVES. Firms could get up to $50 million in payroll tax refunds on new hires and wage increases, as well as tax breaks for hiring the long-term unemployed and veterans.
* OIL AND GAS SUBSIDIES. Several tax subsidies for the energy industry would be repealed, 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.
* OIL AND GAS R&D. This federal subsidy for research and development of oil and gas technologies would be ended.
* OIL & GAS LEASES. A $4 per acre fee would be put on non-producing oil and gas leases on federal lands and waters.
* LIFO ACCOUNTING. The last in, first out method of accounting for inventories — widely used by oil and gas companies to lower their tax bills — would be repealed.
* LCM ACCOUNTING. The lower-of-cost-or-market method of inventory accounting would be repealed.
* COAL SUBSIDIES. Some tax preferences for coal mining would end, including expensing of exploration and development costs, hard mineral fossil fuel depletion, capital gains treatment for royalties and the claiming of the domestic manufacturing deduction for coal production.
* FANNIE, FREDDIE G-FEES. The fees that government mortgage finance giants Fannie Mae FNMA.OB and Freddie Mac FMCC.OB charge lenders to guarantee repayment of new loans would rise by one-tenth of 1 percent at first, and by more later.
* LIFE INSURANCE. Taxation of life insurance contracts as well as the handling of dividends-received deductions and interest expense by life insurers would be made stricter.
* DUAL CAPACITY TAXPAYERS. Foreign tax credit rules would be tightened for certain taxpayers that pay tax in a foreign country while also getting an economic benefit from that country.
* AIRLINE FEES. The fee paid by airline passengers for aviation security would be set at $5 per one-way trip and rise 50 cents a year from 2013 to 2017. A new, $100-per-flight air traffic services fee would be imposed on airlines.
* BANK TAX. A “financial crisis responsibility fee” will be imposed on financial firms with assets exceeding $50 billion.
* PESTICIDE, CHEMICAL, HAZARDOUS WASTE FEES. Government fees charged to companies registering pesticides and chemicals and transporting hazardous wastes would go up.
* NUCLEAR PLANT DECOMMISSIONING FEES. Federal charges to power utilities for shutting down nuclear plants would rise.
* SUPERFUND TAXES. Taxes to fund the clean-up of the worst hazardous waste dumps would be reinstated.
* CORPORATE JETS. An accelerated depreciation tax break for corporate jet owners would be repealed.
* UNEMPLOYMENT INSURANCE SURTAX. A federal tax on employers for unemployment insurance would rise. (Reporting by Kevin Drawbaugh; Editing by Howard Goller)