More than $24 billion in additional estate taxes would have to be paid from fiscal 2010 to fiscal 2019 under a budget proposal for the next fiscal year released Monday by the Obama administration.
More than $24 billion in additional estate taxes would have to be paid from fiscal 2010 to fiscal 2019 under a budget proposal for the next fiscal year released Monday by the Obama administration.
Under the budget, the largest tax increases would come from modified rules on valuation discounts, which would result in more than $19 billion that would be paid in additional taxes over the decade.
The change in taxation would affect less than three-tenths of 1% of estates on a yearly basis, said a Treasury Department official.
On another tax issue, the life insurance industry would have to pay $3.4 billion more in taxes as a result of a proposed loss of the “dividends received” deduction, which prevents the double taxation of corporate earnings, said Whit Cornman, a spokesman for the American Council of Life Insurers of Washington.
The administration also proposed reducing deductions for corporate-owned life insurance, which likely would affect insurance industry revenue.
The life insurance industry reacted angrily to the proposals in a statement released after the briefing.
the administration included $12.7 billion in additional taxes on the life insurance.
The biggest tax increase for life insurers would come from reduced deductions currently available for corporate-owned life insurance.
“Seventy-five million American families rely on the products offered by life insurers for their financial and retirement security,” ACLI said in a statement.
“This is absolutely the wrong time to make it more expensive for families to obtain the security and peace of mind our products provide.”
Individual retirement accounts were also canvassed.
An Obama campaign pledge to allow IRA holders to make early withdrawals of as much as $10,000 without paying penalties was scrapped in the final budget.
“In the final weeks of the campaign nobody could have anticipated that we’d be putting forward an $800 billion recovery act,” a Treasury official said explaining the turnabout.
The proposal was cut in the face of the estimated $1.8 trillion deficit envisioned in the $3.6 trillion budget proposal President Obama is sending to Congress, the official said.
Although the early withdrawal campaign pledge has gone by the wayside, the administration proposes continuing a Bush administration policy that would allow IRA holders who are at least 70½ years old to donate IRA holdings to charities without penalties.
That provision would be extended for two years under the budget plan.
The budget proposal includes a plan to set up “automatic IRAs,” under which companies that do not offer retirement plans to employees would be required to allow employees to make payroll deductions to IRAs as of 2012.
Unless employees specifically refused to allow the deductions, payroll contributions would be made directly to an IRA selected by the employer.
Employers, who would not have to make contributions to the plans, could also elect to have the payments made to a low-cost investment alternative prescribed by statute or regulation under the plan, according to the explanation of the fiscal 2010 revenue proposals issued by Treasury.
Married couples earning up to $65,000 per year would be able to receive contributions of up to $500 per person from the government in a refundable savers credit that would be deposited directly into a retirement plan account under the budget plan.
