US President Barack Obama is increasingly turning to financiers and the firms that employ them as a source of revenue to plug holes in his budget and what he sees as gaps in the tax code itself, media reports say.
Mr Obama yesterday announced $58 billion in new proposals that his aides said would close “unfair loopholes” in the tax system. The changes would mean higher taxes for options and commodities brokers, hedge fund managers, and life insurers such as TIAA-CREF. The tax increases will help pay for Mr Obama’s health care reforms.
The US administration, which is facing massive budget deficits, hopes to raise revenues by closing tax loopholes; it has already stepped up rhetoric against so-called tax havens and has been embroiled in a legal wrangle with jurisdictions such as Switzerland over offshore bank accounts.
Those proposals and others would nearly triple income taxes paid by executives at private equity firms and cap the value of itemised deductions. As part of the changes, high-income earners would be unable to avoid top marginal rates when they are reinstated in 2011 to 36 per cent and 39.6 per cent for US citizens making more than $200,000 annually, analysts said.
The policy initiative was launched as the Obama administration issued revised budget figures projecting the federal deficit would hit a record $1.84 trillion this year and $1.26 trillion in fiscal 2010.
Mr Obama, in his announcement yesterday, proposed to end the ability of options and commodities brokers to pay a blend of capital gains and ordinary tax rates on their income. He’d also abolish the use of equity swaps by offshore hedge fund managers to sidestep US withholding taxes and increase penalties for Americans trying to evade tax by hiding money in offshore banks.
Those proposals follow an earlier plan to make executives at private equity firms and other investment partnerships pay the full tax rate on so-called “carried interest,” the share of a fund’s profits they earn as compensation that is typically 20 per cent of any gains over a certain level.