In his State of the Union address on January 20, United States President Barack Obama outlined a plan to impose higher taxes on the nation’s wealthiest individuals and on financial institutions, and to use the revenue to provide tax benefits for families.Obama said the changes would impact the wealthiest top one percent “almost exclusively,” and said there would be protections for middle-class families and small businesses. The President proposed to raise the top rate of tax on capital gains and dividends (for couples with incomes over $500,000) to 28 percent from 23.8 percent, while also making changes to ensure that the heirs of large estates would have to pay capital gains tax on assets they inherit.
However, no tax would be due from couples until the death of the second spouse, and capital gains of up to $200,000 per couple ($100,000 per individual) could still be bequeathed free of tax. Extra protections would also be included to ensure that “no small family-owned business would ever have to be sold for tax reasons.” In addition, the President would introduce a tax on heavily leveraged financial firms to “reduce the incidence of major defaults.” The 0.07 percent fee would be levied on the borrowed capital of those with assets over $50bn.The additional funds from those tax-raising policies, estimated to be around $320bn over ten years, would be used to provide a new $500 second-earner tax credit to help cover the additional costs faced by two-worker families; streamline and expand child care tax benefits by up to $3,000 per child; and simplify, consolidate, and expand education tax benefits to provide more students up to $2,500 in tax relief each year for five years.
Retirement savings would be boosted. For example, every employer with more than ten employees that does not currently offer a retirement plan would be required to automatically enroll their workers in an individual retirement account (IRA). To minimize the burden on small businesses, any employer with 100 or fewer employees that offers such an IRA would be given a $3,000 tax credit.On the other hand, to prevent the use of tax-preferred retirement plans to accumulate huge retirement benefits, contributions and accruals would be prohibited once balances reach some $3.4m.
Orrin Hatch (R – Utah), the Senate’s Finance Committee Chairman, added that the President’s proposed tax hikes “would be particularly damaging, undoing tax policies that have been successful in helping to expand the economy, promote savings, and create jobs. … The plan appears to be more about redistribution – with added complexity and class warfare directed at job-creating small businesses – than about tax reform.”In addition, the Securities Industry and Financial Markets Association (SIFMA) pointed out that the imposition of the proposed “bank tax on the vast array of financial institutions captured by the President’s proposal under the guise of further limiting excessive risk completely ignores the changes this Administration, Congress, regulators, and industry have implemented over the past six years.”
SIFMA concluded: “This USD110bn targeted tax increase on America’s most productive financial institutions could have far-reaching unintended consequences that will curtail economic growth and job creation, while negatively impacting the allocation of credit and the provision of financial services to individuals and institutions.”
IRS Starts 2015 Tax Season; Free File Launched on 16 january; Helps Taxpayers with New Health Care Law
The Internal Revenue Service and the Free File Alliance on January 16 th 2015 announced the launch of Free File, which makes brand-name tax software products and electronic filing available to most taxpayers for free.
Free File software can help taxpayers with tax preparation, including the health care law that will affect almost everyone. People can use Free File software immediately but e-filed returns will not be transmitted to the IRS until Tuesday, January 20, when the filing season officially begins.
Free File is available only at IRS.gov/FreeFile, thanks to a partnership between the IRS and the Free File Alliance, a consortium of 14 leading tax software companies that make their branded products available for free. Since 2003, more than 43 million people have used Free File, saving $1.3 billion based on a conservative $30-fee estimate.
“You don’t have to be an expert on taxes or the new health care law. Free File software can help walk you through the rules and help you get it right,” said John A. Koskinen, IRS Commissioner. “For 12 years, this partnership between the IRS and the Free File Alliance has helped taxpayers save both money and time. The real winner in this partnership has been the nation’s taxpayers.”