"The idea of increasing taxes on low- to middle-income Americans at this time is ludicrous," said Bryan Hatchell, a spokesman for Reynolds American Inc., the nation's second-biggest tobacco company. "As middle-income Americans struggle to make ends meet in a very slow economic recovery period, this is not the time to hit them with higher taxes."
The biggest tax increase in Obama's budget would limit the value of itemized deductions for wealthy families. The limits would apply to all itemized deductions, including those for mortgage interest, charitable contributions and state and local taxes. They would also apply to tax-exempt interest, employer-sponsored health insurance and income exclusions for employee retirement contributions.
The proposal would raise $529 billion over the next decade.
Charitable groups have already mounted a lobbying campaign to oppose the limits because they are worried they would discourage wealthy people from donating. Obama has made similar proposals in previous budgets and received lukewarm responses from fellow Democrats. Most Republicans oppose it.
Among the other tax changes, Obama's budget would:
- Impose the "Buffett Rule," named after billionaire investor Warren Buffett, an Obama supporter who favors higher taxes. The rules say people making more than $1 million must pay at least 30 percent of their income in federal taxes. The rule would raise $53 billion over the next decade.
- Prohibit tax-free contributions to retirement accounts once the account's assets reach a certain limit. The initial limit would be set at $3.4 million. The proposal would raise about $9 billion over the next decade.
- Eliminate a series of tax breaks for oil, gas and coal companies, raising $44 billion over the next decade.
- Change accounting rules for the way companies value their inventories for tax purposes. The change would raise $81 billion over the next decade.
- Expand and make permanent the research and development tax credit, saving businesses $99 billion over the next decade. The current credit expires at the end of the year, though it is routinely extended.
- Make permanent rules that allow small businesses to more quickly write off expenses, saving business $69 billion over the next decade.