President Obama’s FY 2015 Budget

By :: July 2nd, 2014

When President Obama proposed his 2015 budget last March, he vowed to cut taxes for working class Americans while making sure high income households pay their "fair share." New Tax Policy Center estimates show that, like it or not, Obama would do pretty much as he promised. Low-income households would enjoy a tax cut while those at the top of the income distribution would pay more.

In 2015, for example, the president’s tax plan would boost after-tax income for the poorest 20 percent of households by about 0.7 percent while those in the top 20 percent would lose about 1.2 percent and the top 1 percent would see their income drop nearly 3 percent (blue bars in figure). Low-income workers would benefit from a substantial increase in the earned income tax credit (EITC) for childless workers and an additional child and dependent care credit for families with children under age 5. High-income families would get hit by proposed limits on tax breaks—the “Buffett Rule” and the 28-percent cap on the value of certain tax deductions and exclusions. Overall, taxes would claim an additional 0.6 percent of after-tax income that year.Pres-Budget-Tax-Vox_6f252b

The tax increase would grow slowly over time, generally at the expense of higher-income households. By 2023, average after-tax income would be 0.7 percent lower than under current law (red bars in figure). In contrast, the poorest households would get almost 2 percent more income after taxes that year, in large part because the president would make permanent the expanded refundability of the child tax credit and the increased EITC for larger families that were enacted as part of the 2009 economic stimulus legislation. Those provisions are currently set to expire in 2018.

Most of the president’s tax proposals have appeared in previous budgets, but he added four new ones this year. TPC delves into those additions in a separate analysis that accompanies the distributional estimates.

3Comments

  1. AMTbuff  ::  3:30 pm on July 2nd, 2014:

    Since Congress won’t act on this proposal, President Obama is duty-bound to order the IRS to implement all these minor changes anyway.

    You don’t think the IRS would rubber stamp all this? They did for the health insurance law. Besides, who would have standing to challenge illegal expansion of the EITC?

  2. Michael Bindner  ::  3:16 am on July 3rd, 2014:

    His proposals would do as he says. I would hope so. OMB and the Office of Tax Policy have some pretty good economists and models. Of course, I would prefer a higher minimum wage, which he also supports and no EITC growth and a much more generous Child Tax Credit. Sadly, neither of our proposals will pass the House Ways and Means Committee. Maybe next year – as the Hobby Lobby Case has resurrected the war on women meme that may give Democrats control of both chambers.

    As far as the Buffett Rule, the increases to the dividend tax rate and the capital gains rate make taxes for the wealthy at least as high as most other tax payers. Most secretaries don’t pay much more than the 25% tax rate. Where there is still a Buffett rule issue is in Social Security Payroll taxes – which are capped. I personally favor lowering the cap on the employee contribution – so that the wealthy get lower payments on retirement – as removing the cap would ultimately provide higher payments unless the bend points are made all the more sharp. I would rather decouple the employer payroll tax and the employee payroll tax and distribute the employer levy equally to each worker. For the most part, this ends the Buffett rule.

    I would much rather shift from a regressive payroll tax to a less regressive Value Added Tax (no cap is possible) – which also solves most of the Buffett problem – or even a VAT like net business receipts tax – which allows exclusions – with insured personal accounts holding employer voting stock. Over a decade, Buffett’s employees would buy him out and there would be no Berkshire Hathaway and Warren would be just another ex-plutocrat with a rather large nest egg and most of his money in the hands of Melinda Gates.

    The real deal on distribution of taxes and income is that the distribution does not matter. What matters is power and control. If the workers have the latter, the green paper they receive for it is just a number.

  3. News Round-Up: July 7, 2014 | Tax Credits for Working Families  ::  3:49 pm on July 7th, 2014:

    […] and providing an additional Child and Dependent Care Credit for families with children under 5. (TaxVox, […]