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Wednesday August 20, 2014

Washington News

Washington Hotline

White House Releases 2015 Budget

On March 4 the White House released the proposed federal budget for 2015. That fiscal year will commence on October 1, 2014. The proposed budget includes both new benefits and new taxes.

1. Earned Income Tax Credit – The White House budget proposes that single persons with modest earned income could benefit from a maximum credit up to $1,000. The estimated $60 billion cost of this program could benefit 13.5 million workers. The cost is offset by taxing hedge fund managers on their income at ordinary rates rather than capital gains rates for the "carried interest."

2. Retirement Plans – The myRA plan and other automatic IRA accounts would potentially encourage 13 million workers to fund accounts for their retirement.

3. Pell Grants – Education grants for college students would not be taxed.

4. Infrastructure – There would be a four year plan to fund infrastructure throughout the nation with a projected cost of $302 billion.

There are several major tax provisions, with three primary revenue-raising proposals.

1. Large Banks – Banks with over $50 billion in assets would be subject to a new tax on liabilities. The White House noted that a tax on large banks and financial institutions has now been proposed both in this budget and in the tax reform bill by Chairman of the House Ways and Means Committee Dave Camp (R-MI).

2. 28% Deduction Cap – The upper income individuals who are in the 35% and 39.6% tax brackets would first face the "Pease" 3% floor on itemized deductions and then would also have a 28% cap that reduces their deduction tax savings. In effect, a portion of their itemized deductions would be eliminated under this rule.

3. Buffett Tax – The 30% minimum tax on upper income taxpayers known as the "Buffett tax" would be implemented.

As is quite common, there were multiple comments and observations by leaders of both parties. The major comments were made by the White House and both Senate and House Budget Chairs.

The White House published a press release and emphasized that the budget "invests in infrastructure, job training and pre-school; cuts taxes for working Americans while closing tax loopholes enjoyed by the wealthy and well-connected; and reduces the deficit."

Sen. Patty Murray (D-WA) is Chair of the Senate Budget Committee. She noted, "The two-year bipartisan budget deal signed into law in December was a strong step in the right direction, but it shouldn't be the last step we take. So while the American people have a budget in place and the certainty they deserve that there won't be another budget crisis through the end of 2015, we in Congress owe it to them to work together to build on that bipartisan foundation."

Chairman of the House Budget Committee Paul Ryan (R-WI) stated, "The President's budget is yet another disappointment – because it reinforces the status quo. It would demand that families pay more so Washington can spend more. It would hollow out our defense capabilities. And it would do nothing to preserve or strengthen our entitlements."

Published March 7, 2014


Previous Articles

Chairman Camp's Tax Simplification Proposal

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IRS Ready for Income Tax Returns

Will myRA Boost Retirement Saving?

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