The Issues
America needs a tax system that raises the revenues needed to sustain vital services and improve economic security and opportunity for all Americans. After years of tax cuts for the rich and powerful, tax policies must ensure that individuals and corporations contribute their fair share, based on their ability to pay.
The Federal Budget: An Insider's Guide to National Priorities
The federal budget is a window into the priorities of the President and Congress, and the budget process guides legislative efforts and outcomes. The priorities of this Administration stand in stark contrast with those of the previous one: President Obama requested, and Congress approved, a budget that authorizes legislation to provide comprehensive, affordable health care for all, move toward energy independence and limit greenhouse-gas emissions, improve education from early childhood to college and beyond, and address other high-priority needs.
Expanding Opportunity, Restoring Responsibility
To provide the resources needed to sustain vital services, finance needed investments in the nation’s future, promote tax fairness, and rein in long-term deficits, President Obama has proposed cutting wasteful corporate subsidies and raising new revenues by closing tax loopholes, improving enforcement, and making the very wealthy and corporations pay their fair share of taxes. Congress and advocates have proposed additional progressive options for reforming the federal tax code and financing national priorities in a fiscally responsible way.
The Bush Tax and Budget Legacy
The massive tax cuts enacted during the Bush Administration reduced tax fairness, increased inequality, burdened the nation with debt, undermined critical services, and failed to grow an economy that works for everyone. The expiration of nearly all of these tax cuts in 2010 provides an opportunity to shape a fairer, more responsible tax policy.
Closing the Tax Gap and Tax Loopholes
Every year, hundreds of billions of dollars that should be paid in taxes by corporations, business owners, and wealthy investors are uncollected, putting an unfair burden on hardworking Americans who pay all their taxes. Closing tax loopholes and requiring tax cheats to pay what they owe would increase tax fairness and raise some needed revenues.
Taxing Private Equity and Hedge Fund Managers Fairly
Super-wealthy managers of private equity and hedge funds pay lower tax rates on their compensation than ordinary working Americans. President Obama’s FY 2010 budget proposed closing these tax preferences, and Congress is considering such legislation.
This tax is supposed to ensure that high-income households pay a minimum amount of income tax. But, unless it is changed, the AMT will affect millions of additional taxpayers next year. Reforms could prevent the AMT from impacting the middle class, while protecting revenues by ensuring that the very wealthy pay their fair share.
Tax Credits for Working Families
The Child Tax Credit, Earned Income Tax Credit, and Child and Dependent Care Credit provide valuable tax benefits for working families. The American Recovery and Reinvestment Act of 2009 expanded the refundable Child Tax Credit and EITC and added new credits, but these improvements expire after 2010.
Income from investments — capital gains and dividends — is currently taxed at much lower tax rates than income from work. Because most investments are owned by the very wealthy, the benefits of the special low tax rate on capital gains and dividends overwhelmingly go to the very richest Americans.
The federal estate tax, which currently applies only to the value of individual estates above $3.5 million ($7 million for couples), is expected to affect fewer than 3 in 1,000 estates this year. Yet some congressional leaders and a handful of super-wealthy families are seeking to permanently repeal or drastically reduce this highly progressive tax.