President Barack Obama's proposed budget for FY 2012 contains a number of provisions to close budget deficits that will no doubt affect wealthy clients. While this budget will be parsed, dissected and debated, and may look very different once it is final, here is some of what's in the budget released Monday.
The Treasury's "Greenbook," which explains the proposals in the budget, sets out this overview: The budget "positions our nation to win the future and out-innovate and out-compete the rest of the world by including tax cuts to encourage needed investments in innovation, infrastructure, and education, including tax cuts for small business investment, clean energy, and research and development. While preserving these incentives, the President also believes that, to be competitive, we must pursue comprehensive corporate tax reform, and, as the President has announced, we are now looking at ways to lower the corporate tax rate and to pay for this by cutting corporate tax expenditures."
The proposals acknowledge the need to help the economy grow and while decreasing the budget deficit. Most proposals that most directly affect wealthy clients involve higher taxes once temporary cuts expire in 2012.
Obama remarked in his Budget Message: "I continue to oppose the permanent extension of the 2001 and 2003 tax cuts for families making more than $250,000 a year and a more generous estate tax benefiting only the very largest estates. While I had to accept these measures for 2 more years as a part of a compromise that prevented a large tax increase on middle-class families and secured crucial job-creating support for our economy, these policies were unfair and unaffordable when enacted and remain so today. I will push for their expiration in 2012."
What follows is a summary of provisions in the proposed budget that are likely to affect wealthy clients.
Income Tax
For those earning more than $250,000, tax breaks from 2001 and 2003, which were extended through 2012, would expire.
Estate Tax
The budget says allowing the "tax on large estates" to expire at the end of 2012, going back to 2009 exemption and tax levels, coupled with allowing the income-tax break, above, to expire, will shave an estimated $963 billion from projected deficit between fiscal 2012 and fiscal 2021.
Capital Gains
The proposal includes raising the qualified dividend and long-term capital gains tax to 20% from 15%, for those earning more than $250,000, beginning in 2013.
