Obama goes after wealthy with super dividend tax
PRESIDENT Barack Obama's budget plan calls for taxing dividends received by high-income taxpayers as ordinary income, raising the top rate to 39.6pc from 15pc as part of a $1.4 trillion tax increase on top earners over the next decade.
The proposal, in the president's fiscal 2013 budget released yesterday, would reverse his previous policy that called for taxing dividends more lightly than wage income.
The plan would treat dividends as ordinary income for married couples making more than $250,000 (€189,000) a year and individuals making more than $200,000. The dividend tax proposal would raise $206.4bn over 10 years.
"We simply can't afford to devote $206bn for lower tax rates for the highest-income Americans," Gene Sperling, White House director of the National Economic Council, said yesterday. "Our system for taxing investment income for the most well-off Americans is clearly broken."
Mr Obama is proposing a top individual income tax rate of 39.6pc in 2013, up from 35pc. His budget would tax capital gains at a top rate of 20pc, up from 15pc. The top dividend tax rate is now 15pc.
An additional 3.8pc tax on the unearned income of couples earning $250,000 and individuals making at least $200,000 will take effect in 2013 as part of the 2010 healthcare law. As a result, some taxpayers would pay 43.4pc in federal taxes on their dividends next year, triple what they now pay.
The proposal reverses the administration's policy and would return dividend taxation to its pre-2003 status. The administration's fiscal 2012 budget had justified setting the top capital gains and dividend tax rates at 20pc because it "reduces the tax bias against equity investment and promotes a more efficient allocation of capital".
The proposal is part of Mr Obama's attempt to tap the wealthiest Americans to reduce the federal budget deficit.
"We don't need to be providing additional tax cuts for folks who are doing really, really, really well," Obama said.
The administration also wants to impose a 30pc minimum tax for individuals with annual incomes of at least $1m, known as the "Buffett rule" after billionaire investor Warren Buffett, who originated the idea last year.
That would replace the alternative minimum tax, "which now burdens middle-class Americans rather than stopping the richest Americans from paying too little as was originally intended," the administration said. (Bloomberg)