On Tuesday, the Pres took to the podium for his 6th annual self-touting prophecy, and like most SOTU’s, it contained a laundry list of policy initiatives for 2015, some pipe dreams and some fabrications. The usual suspects were mentioned – raising the minimum wage, slowing “climate change”, combating the national and global terrorism threat, etc. In all fairness, this one may have actually been his first actual claim of success, and he didn’t disappoint with the quick quips saved for snarky Republicans.
While short on specifics, several policy proposals may affect individual income taxes going forward.
Expand the Child Care Tax Credit – “a new tax cut of up $3,000 per child, per year”. Currently the credit is less and has its limitations but what wasn’t shared are the phase outs and limitations on the new proposal. We’re talking a potentially significant impact on those at the lower-end of the income spectrum.
New tax on the accumulated wealth of the dastardly “super rich”. This tax is in addition to the taxes paid while the wealth was earned, the taxes paid on the income the wealth produces, and the estate tax paid on the value of wealth at the time of the owner’s death. The devil is in the details and becomes a 56.8% effective “trust fund tax”.
The President’s budget comes out in a couple of weeks and it will undoubtedly provide specifics related to the proposals voiced Tuesday. But what are the chances these actually become law? Somewhere between me competing in this weekend’s NHL ASG and Johnny PartiesTooMuch taking the Browns to next year’s Super Bowl. For what it’s worth, since Tuesday, Congressional Republicans (now in control of both houses) have said most if not all of the Pres’ proposals are non-starters.
The President and Dems are particularly interested in shutting down inversions and effectively punishing multi-national companies, as well as the oil and gas, and banking industries. Of greater concern to most families right now is what he’s trying to do to those of us saving for our children’s education.
Since Tuesday, what you’ll hear most people argue on the tax front is what was NOT said. Noticeably absent was the lack of reference to tax reform. While he did mention “lobbyists have rigged the tax code with loopholes”, he made no mention of any type of wholesale tax reform. Currently, the US has the highest corporate tax rate of any industrialized country and remains the only country to tax the world-wide earnings of a company (vs. taxing only the income earned within the United States) essentially putting the United States at a competitive disadvantage globally. Congressional Republicans have made tax reform a priority (total tax reform, including individual taxes) compared to the President’s corporate tax reform, as close as we’ve see as common ground between Democrats and Republicans…which also makes its absence Tuesday night more interesting.
What will happen in the future? Time will tell, but probably nothing comprehensive in the next two years.