President Barack Obama’s proposed 2015 budget would raise taxes on many wealthy individuals while providing an estimated 13.5 million Americans a tax break, the White House announced Monday, in the latest manifestation of Democrats’ midterm election agenda.
Obama’s budget, to be rolled-out on Tuesday, would expand the Earned Income Tax Credit for Americans without children, while expanding the Child and Dependent Care Tax Credit to help families afford child care, the White House announced. Additionally it will include automatic enrollment in Individual Retirement Accounts for employees to help save for retirement and several provisions to help students and families pay for college tuition.
The White House is framing the proposals as a continuation of Obama’s populist State of the Union message, “Opportunity for All,” which he encouraged Democrats to embrace at last week’s meeting of the Democratic National Committee.
The $60 billion in lost tax revenue would be paid for by stripping two tax breaks employed by the nation’s wealthiest, which the White House said “do not promote work or growth.” It would eliminate a provision used by hedge funds and private equity firms to treat income from managed investments, known as carried interest, as capital gains, as opposed to ordinary income, effectively raising the tax rate on billions of dollars in pay-outs to firm managers. It would also remove the so-called Newt Gingrich or John Edwards loophole, which allows individuals to treat some income as corporate profits to avoid payroll taxes.
Obama has tried to raise the carried interest tax rate to the level of ordinary income for years, but has been stymied by stiff opposition in Congress that has not subsided. The election year budget is a is designed to showcase the party’s focus on the middle class, while portraying GOP opponents as defenders of the wealthy.
“This [carried interest] tax rate is significantly below the income and payroll taxes that a manager would owe on comparable salary income and is less than the effective Federal income and payroll tax rate for a single childless worker making $50,000,” the White House said in an economic report on the proposed changes.