WASHINGTON (Reuters) - President Barack Obama on Wednesday revived a list of his favourite tax ideas, hoping to raise $580 billion (378.3 billion pounds) in new revenues from the wealthy over a decade in a potential opening gambit to forge a deal with Congress to overhaul the U.S. tax code.
While certain not to move forward en masse, his 2014 budget blueprint has elements likely to spur discussion, including a proposal to tax derivatives more stringently, as lawmakers weigh a tax code revamp and face a deadline on the government’s debt limit this summer.
“These are all opening bids in any potential grand bargain, so from that perspective they are important,” said Chris Krueger, an analyst at Guggenheim Partners.
Congressional Republicans largely blasted the Democratic president’s budget proposal, highlighting the difficulty policymakers have had forging a long-term deficit-cutting plan.
Obama’s budget does not seek to raise individual tax rates as he has proposed in prior budgets. For years, he sought to raise rates on household income above $250,000.
Obama and most Republicans agreed during last year’s fiscal cliff battle to raise rates for households earning more than $450,000 a year, to 39.6 percent from 35 percent.
A senior administration official said on Wednesday the White House preferred not to “re-litigate” that fight.
Obama’s budget also proposes a new “Buffett tax,” a minimum tax rate for the wealthy, named for investor Warren Buffett, that phases in a minimum 30 percent tax rate on household income above $1 million.
The bid revives Obama’s offer last year to Republican House of Representatives Speaker John Boehner during the talks to avoid the so-called fiscal cliff of looming tax hikes.
The budget also reprised a proposal to cap tax breaks among wealthier taxpayers, starting at household income of roughly $250,000, limiting the value of deductions and loopholes in determining taxable income. A phased-in limit on deductions is now part of the tax code for more affluent taxpayers.
The new cap would apply to the same list of breaks proposed in years past, including the charitable tax break and the exemption for municipal bond interest.
Boehner last year said he could back raising new revenue through curbing deductions, though he now rules out new revenue.
One battle Obama proposed to fight again is over the estate tax, pitching to raise it to 45 percent for estates worth over $3.5 million, after a deal to cap it in January at 40 percent for estates over $5 million.
The budget also ends a tax break for “carried interest” profits earned by fund managers like those who run private equity and other investment firms, officials said.
In a bid to attract Republicans, Obama proposed changing the inflation calculation for Social Security benefits to help shore up the finances of the public pension program, which would raise revenue and curb benefits.
That proposal also would push people more quickly into higher tax categories, as their income rises faster than the brackets are adjusted.
Top tax-writers in Congress are working on a tax rewrite, but the process is fraught with disagreement over details and whether to raise new revenue in the process.
Prominent in the budget are proposals to raise hundreds of billions of dollars from U.S. multinational corporations that avert tax on income held overseas. Obama seeks to raise about $157 billion over a decade with these measures.
These include limiting the ability of corporations to defer tax on foreign income and tightening foreign tax credit rules.
Obama also sought more revenue by curbing energy tax breaks, and proposed an end to a tax advantage for corporate jets.
“It doesn’t mean the administration is not open to a deal,” said Michael Mundaca, Obama’s top tax official in the Treasury Department during his first term and now co-director of national tax at Ernst & Young. “It is just that they may not be going to negotiate through the budget.”
There were a few areas of potential agreement with Republicans. Obama pitched changing the taxation of derivatives to mark them to a market price yearly for taxation purposes, which he says will raise $19 billion over a decade.
That proposal largely mirrors one put forward by House Ways and Means Committee Chairman Dave Camp. But that idea is part of a plan to drastically cut individual tax rates, which most Democrats have not signed onto.
Another area that suggested compromise to some was Obama’s call for “revenue-neutral” business tax reform, something he had been unclear on in the past.
“If he had taken a lot of corporate expenditures and used that for deficit reduction, that would really spell doom for tax reform,” said Gabe Horwitz, director of the economic program at the Democratic centrist group Third Way.
The cuts to corporate breaks are counterbalanced by proposals to double a tax credit for small start-up companies and extend a business research and development tax credit. Obama also wants to expand a child care tax credit.
The president has backed cutting the top U.S. corporate tax rate to 28 percent from 35 percent, now the highest in the industrialized world. But most companies do not pay the top rate after taking advantage of numerous tax breaks.
Editing by Kevin Drawbaugh, Howard Goller, Tim Dobbyn and Todd Eastham