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U.S. President Barack Obama outlined significant tax reforms in his 2012 State of the Union address Tuesday night. As expected, tax reform was a main theme in the president's speech, mentioned 34 times.
The White House today (Wednesday) fleshed out in detail the tax reforms aimed to achieve the president's goals of reviving U.S. manufacturing and job creation.
While some of the reforms received hearty applause from Congress members, many will be heavily battled by policymakers as well as the Republican candidates as the 2012 election heats up.
2012 State of the Union Tax Reforms
The following proposed tax reforms aim to help America's middle class - to reduce U.S. income inequality and promote education:
- Extend payroll tax cuts - set to expire at the end of February - to the end of the year to prevent $40 being removed from middle-class paychecks
- End tax cuts for those earning more than $250,000
- Enforce the Buffett Rule - a 30% minimum tax rate for those earning more than $1 million
- Extend the American Opportunity tax credit, which provides up to $2,500 toward higher education expenses
The following tax reforms were proposed to spur U.S. manufacturing:
- 20% income tax credit for companies that move operations back to United States from abroad, and no more tax deductions given to companies that move operations overseas
- 9% tax deduction for U.S. manufacturers; 18% deduction for advanced manufacturing technologies that create U.S. jobs
- $6 billion in Manufacturing Communities Tax Credits, for investments that aid communities suffering from excessive job loss
- $5 billion in Advanced Energy Manufacturing Tax Credits, to drive $20 billion in investments for new clean energy manufacturing
- 100% expensing of plant and equipment investments by U.S. manufacturers - providing up to $50 billion over two years in savings for businesses
- Remove the tax loophole allowing companies to pay less in U.S. taxes by holding profits overseas
- Impose a minimum tax on the international earnings of U.S. companies - aimed to limit sending jobs overseas
Look for Republican candidates to attack some of President Obama's State of the Union tax reforms as they gear up for Florida's Jan. 31 primary election.
News and Related Story Links:
- Money Morning:
How Mitt Romney's Bain Career Will Inflame the Class Warfare Debate
- The White House:
President Obama’s Blueprint to Support U.S. Manufacturing Jobs, Discourage Outsourcing, and Encourage Insourcing
- The Financial Times:
White House details tax reform
- The White House:
State of the Union 2012