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Tuesday, January 25, 2011

Tax Portions of President Obama's State of the Union Address

SOTU We need to get behind this innovation. And to help pay for it, I'm asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies. I don't know if you've noticed, but they're doing just fine on their own. So instead of subsidizing yesterday's energy, let's invest in tomorrow's. ...

Of course, the education race doesn't end with a high school diploma. To compete, higher education must be within reach of every American. That's why we've ended the unwarranted taxpayer subsidies that went to banks, and used the savings to make college affordable for millions of students. And this year, I ask Congress to go further, and make permanent our tuition tax credit — worth $10,000 for four years of college.

Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change.

So tonight, I'm asking Democrats and Republicans to simplify the system. Get rid of the loopholes. Level the playing field. And use the savings to lower the corporate tax rate for the first time in 25 years — without adding to our deficit. ...

Now, I’ve heard rumors that a few of you have some concerns about the new health care law. So let me be the first to say that anything can be improved. If you have ideas about how to improve this law by making care better or more affordable, I am eager to work with you. We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses.

And if we truly care about our deficit, we simply cannot afford a permanent extension of the tax cuts for the wealthiest 2% of Americans. Before we take money away from our schools, or scholarships away from our students, we should ask millionaires to give up their tax break. ...

In fact, the best thing we could do on taxes for all Americans is to simplify the individual tax code. This will be a tough job, but members of both parties have expressed interest in doing this, and I am prepared to join them.

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Tracked on Jan 27, 2011 6:09:01 AM

Comments

Once again, Obama thinks that all money belongs to the government and that letting people keep any part of what they earn is "taking away" from the government. If there weren't so many denials, one might think that he is a socialist.

Posted by: Woody | Jan 26, 2011 5:58:12 AM

Someone has to pay for this country. There is no free lunch, no matter what political ideology you subscribe to. Unless the liberals are willing to give up the social safety net and the Right is willing to give up its prisons and tanks and aircraft carriers and all of us are willing to give up clean water, safe toys and national parks we will have to pony up our fair share. If you do not like it, move. Might be hard to swallow but not every investment in public services is socialism and if so not all socialism is bad. Capitalism needs government services also if for nothing else than to bail it out when it collapses because of its bad decisions. The idea that all financial downturns are because of the government is as silly as the idea that the government or the tax code creates jobs. There is a thing called the business cycle that has been around a while. Your theory might tell you that markets are effecient and that capitalism might run smooth without help but your theory is wrong and not supported by a shred of evidence. Just ideology.

Posted by: George W | Jan 26, 2011 8:36:47 AM

As you know, the Ways and Means Committee of the House of Representatives is currently engaged in a comprehensive re-examination of the existing tax structure. To help achieve this objective, I have asked the Secretary of the Treasury to present by the end of the year recommendations to remove existing inequities of our tax structure, simplify the needless complications which have developed over the years in tax laws, and generally secure a better balance of tax revenues. The analysis in the Treasury is being made in close cooperation with the appropriate Committees of the Congress and their staffs.


--President Dwight D. Eisenhower, May 20, 1953

Posted by: Bob | Jan 26, 2011 8:51:22 AM

Are you kidding Woody? Where did you hear that? Are you the president of a big oil company? A millionaire in the top 2% of income earners? Or are you just listening to the voices in your head?

Posted by: Fred | Jan 26, 2011 9:19:47 AM

George W

1) Could we skip the Orwellian "investment" and return to the value-neutral spending?

2) Actually, capitalism is not supposed to need the government to bail it out. Many companies have and will go bankrupt. The "too-big-to-fail" meme is scary.

3) George says "The idea that all financial downturns are because of the government is as silly as the idea that the government or the tax code creates jobs."

I agree that financial downturns are (ususally) not caused by the government. You seem to agree that the government cannot create jobs. I presume you, therefore, agree that the stimulus was a waste?

4) Geaorge also said, "There is a thing called the business cycle that has been around a while. Your theory might tell you that markets are effecient [sic] and that capitalism might run smooth without help but your theory is wrong and not supported by a shred of evidence. Just ideology.

The theory is that capitalism is self-correcting, not smooth and not painless. Your ideology seems to be government intervention can eliminate or make less painful these downturns. Small question - with all of FDR's interventions in the Great Depression, said Depression lasted longer in the US than elsewhere? Explanation? How have state run economies done in the 20th Century?

Posted by: Ed D | Jan 26, 2011 10:39:02 AM

Fred stated "Are you the president of a big oil company? A millionaire in the top 2% of income earners? Or are you just listening to the voices in your head?

I cannot presume to answer for Woody, so here is mine. Other than the depletion deduction, I am not aware of any deduction (loophole, tee hee)that is available to an oil company that is not available to any other business. And depletion, a deduction for using up reserves, is limited to US production where Big Oil is not the major player. (Full disclosure - I worked for Big Oil in NYC 1976-1980.)

The top 2% starts at about $250,000, not $1 million. In any case, you believe that they should pay more tax. Why? Because they "have earned enough" and so we can now expropriate their additional earnings above a certain level? Is it because you believe that they are evil because they made so much.

I will let you in on a big secret. I have been well paid and am toward the end of my career. Since we spent less that we earned, we have stored away nuts for the winter (often referred to as savings.) If the Prez raises my taxes, I will proably work less and retire earlier. High earnings do not equal the wealth you seem to believe is evil. High earners are people who are trying to become rich.

While this may not be technically socialism, the view that the government gets to decide how much of your earnings you get to keep veers in that direction.

Posted by: Ed D | Jan 26, 2011 10:58:49 AM

Paul,

You missed the part about repealing the 1099 requirements that were passes as part of the health care law. I think he said something like "repealing the onerous record keeping requirements for businesses."

Of all things, I think this is the tax measure most likely to pass both the House and Senate, and perhaps on a very fast track. Ironic as the government is so concerned about closing the tax gap and this measure, the required information reporting, would be the most effective measure to combat the tax gap.

Also ironic as it was used to calculate the revenue portion of the health care bill and now that revenue, which could be much more than anyone thinks given that all those people/businesses that can get away with cheating because there is no information reporting, will be gone. So the health care law becomes blacker hole in the deficit as revenue is stripped from it.

Ugh.

It is amazing how gifted our elected officials are at talking out of both sides of their mouth. All of them. (R), (D), and even (I).

But I thank them all for eternal complexity and necessity of tax lawyers given reform and manipulation of the reform until it needs reform again. Somebody will always need a tax attorney, unless of course they're dead (the other eternal reality).

Posted by: tax guy | Jan 26, 2011 11:26:25 AM

Bob,

Just read your 1953 Eisenhower quote. Now that is Presidential power! IRC 1954 only 1 year later. Reagan had to push for several years before IRC 1986 (which started in 1982). I wonder whether the current President and Administration has the keches to do the same.

Given that President Obama basically said "I want health care reform" and then exerted no pressure or influence on anyone in Congress and merely signed the bill given to him, with all its faults, and then claimed that *he* helped reform health care is not a sign of executive (or Presidential) power. The President, at his core, is a legislator and used to working inside legislative bodies. So that is his way of doing business. Lots of speeches (and I think he's the best speaker in a long time, even possibly better than the "'great communicator"), but no real promises and no details. He leaves the details to Congress and then signs the bill they passed. That way he cannot lose because he never advocates for anything (an item) that might be left out of the final bill and be considered a "loss."

But that being said, the most important part of the health care bill, information reporting for all (especially all those small businesses and self employed who cheat on their taxes rampantly), is going to be repealed (one small line in the State of the Union and one major item for the Republican majority in the House). So all those people can go on cheating because information reporting is a "burden." Isn't it a burden for everyone else required to do it?

I have been very disappointed and let down by this Administration. I wonder if the GOP will get their act together (unusual for the GOP not to have its act together) and run someone who can actually beat him or if a wing nut will prevail. This time last election cycle was a frenzy. Wonder if we'll see anything at all before late 2011. Wonder what the tax platform will be.

Posted by: tax guy | Jan 27, 2011 5:01:21 AM

Ed D.
If you're not aware of any deduction available to the big oil companies not available to all, you should look a little closer. This is not to mention the bailouts, "subsidies" & the like doled out to big business.
As for the top 2%, you don't know me, how can you tell me what I believe? (sounds a bit pompous to me) Do you believe, as you say, that you are evil because you made so much?
I too am a high earner but I don't have the guilt complex that you seem to have. But after seeing my taxes go down during the Bush years, I can understand the need to have them return to a more reasonable level.
I'll pray for your soul tonight.
fred

Posted by: Fred | Jan 27, 2011 3:13:50 PM