White House touts tax breaks in budget

The White House on Monday night touted middle-class tax breaks it is including in its 2015 budget proposal set for release on Tuesday. 

The expanded tax breaks were mostly called for in President Obama’s State of the Union address last month, in which the president stressed combating income inequality as a top goal.  

{mosads}The biggest is an expansion of the Earned Income Tax Credit (ETIC) used by lower-income workers, paid for by ending several tax breaks for more wealthy individuals.  

“The president’s budget will lay out the details of this proposal, which would cut taxes for 13.5 million working Americans, while also proposing to expand tax cuts to help middle-class and working families afford child care, send their kids to college and retire with dignity,” the White House said in a statement.  

The White House said the new tax breaks would be paid for by eliminating a tax break used most often by Subchapter S Corporations to avoid the Medicare tax on earnings, and by closing the “carried interest” provision that allows private equity managers to pay a top rate of 23.8 percent on most of their earnings, rather than 39.6 percent.  

The budget would call for current levels of ETIC and the Child Tax Credit to be extended permanently.  

It would also expand the Child and Dependent Care Tax Credit, which the White House estimates would give 1.7 million families about $600 each. 

The budget also has a proposal to make automatic the opening of a tax-sheltered Individual Retirement Account. Workers could opt out of contributing, but the proposal would tend to increase savings rates while decreasing tax revenue.  

The White House also touted a budget provision that would extend the American Opportunity Tax Credit and one that would exclude some student loan forgiveness from taxation. 

The 2015 budget is coming out a month late and will also propose $56 billion in stimulus spending above the level in the December budget deal. The new spending is to be offset by savings and tax increases elsewhere. 

Given the looming midterm election and the fact that appropriators already have a top-line discretionary spending level for 2015 due to the December budget deal, much of the budget proposal is considered dead on arrival this year. 

The EITC was cut back in a last week’s tax reform proposal from House Ways and Means Committee Chairman Dave Camp (R-Mich.), but was given significant praise in a welfare program report issued Budget Committee Chairman Paul Ryan (R-Wis.) on Monday.