View the full Greenbook here
“The President’s Budget is based on the conviction that an agreement to
put our nation on a sound fiscal course is within our reach and that we can
achieve that goal while making targeted investments to strengthen the economic
recovery, create jobs and lay the foundation for long-term growth,” said
Treasury Secretary Jacob J. Lew.
Greenbook Includes Policies to:
- Jumpstart Growth
- Providing a 10-percent tax credit for new jobs and payroll
increases focused on small business through 2013.
- Providing tax credits to support domestic clean energy
- Designating 20 ‘Promise Zones’ to promote job creation and
investment in economically distressed areas that have demonstrated potential
for future growth and diversification into new industries.
- Promote Investment
in Infrastructure by:
- Creating a new permanent America Fast Forward Bond program
to help facilitate and reduce the cost of financing new projects for State and
- Providing a larger federal subsidy rate for America Fast
Forward Bonds for School Construction.
- Exempting from the application of the Foreign Investment in
Real Property Tax Act (FIRPTA) gains of foreign pension funds from the
disposition of U.S. real property interests.
- Provide Permanent Tax Relief for Middle-Class Families by:
- Increasing the Child and Dependent Care Tax Credit available
to many working families.
- Improving retirement security by providing for automatic
enrollment in IRAs.
- Ask the Most
Fortunate to Contribute to Balanced, Credible Deficit Reduction by:
- Implementing the Buffett Rule by imposing a new “Fair Share
Tax” on high-income taxpayers.
- Limiting tax expenditures for the affluent by capping
itemized deductions and certain other deductions and income exclusions at 28
- Restoring the estate, gift, and generation skipping transfer
taxes to 2009 levels.
- Taxing carried interest profits as ordinary income.
- Eliminating a special depreciation benefit for corporate
- Level the Playing
Field for American Business through Revenue-Neutral Business Tax Reform
- Expand Manufacturing and Support Insourcing Jobs in America
- Establishing tax incentives for locating jobs and business
activity in the United States and prohibiting tax deductions for shipping jobs
- Providing a new manufacturing communities tax credit to
encourage investments and job creation.
- Enhancing the research and experimentation credit and making
- Tax Relief to Help
Small Business Grow and Hire by:
- Extend increased expensing for small business.
- Permanently eliminating the capital gains tax on certain
small business investments.
- Doubling the amount of expensed start-up expenditures.
- Expanding and simplifying the Small Business Health Care Tax
- Excluding certain assets of small taxpayers from the uniform
capitalization (UNICAP) rules.
- Reduce Incentives to Shift Income and Assets Overseas by:
- Closing loopholes and ending abuses—like transfer pricing
abuses that shift intangible income and assets overseas—to produce $157 billion
in savings over the next 10 years.
The President’s Fiscal Year 2014 Budget demonstrates his
continued commitment to addressing the challenges we face as a nation – building
a foundation to promote economic growth while bringing our deficits down to a sustainable
The challenges addressed in the President’s Budget – strengthening
growth now, investing in our future, and putting our nation on a sound fiscal
footing – complement and depend on each other.
By making investments in our economy today, we will help grow a stronger
future and that, in turn, will make our fiscal challenges considerably more
manageable. The budget reduces the deficit in a balanced way while protecting
the investments that must be made in education, manufacturing, clean energy, infrastructure,
and small businesses to grow the economy and create jobs here at home.
Today, the U.S. Department of the Treasury released a key
document that points the way toward meeting these challenges – the General
Explanations of the Administration's FY2014 Revenue Proposals, or “Greenbook.”
The Greenbook explains the Administration’s revenue proposals included in the
Budget that seek to boost near-term growth; promote investment in
infrastructure; provide permanent middle-class tax relief; add balance to
deficit reduction by asking the most fortunate Americans to contribute; level
the playing field through revenue-neutral business tax reform; encourage
onshore investments in manufacturing and insourced jobs; cut taxes for small
businesses; and limit incentives for shifting income and assets overseas.
The President is committed to working with Congress to reform
the U.S. business tax system to enhance American competitiveness, lower rates,
broaden the tax base, and level the playing field for companies without losing
any revenue. The Budget also contains detailed proposals that will cut the
deficit by an additional $1.8 trillion over the next 10 years. These proposals,
which build on the $2.5 trillion deficit reduction achieved in the President’s
first-term will put our debt on a declining path relative to GDP.
- Provide a temporary 10-percent tax credit for new jobs and wage
increases. The Budget proposes to provide a new income tax credit for
employers who increase their payroll, whether through job creation, increased
wages, or both. The maximum amount of the increase in eligible wages would be $5
million per employer, for a maximum credit of $500,000. Firms with annual wages below $20 million
would be eligible for this credit.
- Provide temporary tax credits for domestic clean energy manufacturing. The
President is proposing to extend $2.5 billion in tax credits to support
investment in domestic clean energy manufacturing, ensuring new windmills and
solar panels will incorporate parts that are produced and assembled by American
- Designate 20 ‘Promise Zones’ to promote job creation and investment.
The Administration proposes to designate 20 Promise Zones (14 in urban areas
and 6 in rural areas). Promise Zones would promote job creation and investment
in economically distressed areas that have demonstrated potential for future
growth and diversification into new industries.
- Provide America Fast Forward Bonds. The Budget proposes to
create a new permanent America Fast Forward Bond program, which would be an optional
alternative to traditional tax-exempt bonds. Like Build America Bonds, America
Fast Forward Bonds would help facilitate and reduce the cost of financing new
projects for State and local governments. America Fast Forward Bonds could
finance governmental capital projects, current refundings of prior public
capital project financings, short-term governmental working capital financings,
and financing for the types of projects and programs that can be financed with
qualified private activity bonds (including financing for section 501(c)(3)
- Enhance the Federal Subsidy Rate for America Fast Forward Bonds for
School Construction. The Budget would temporarily provide a 50 percent
Federal subsidy rate for America Fast Forward Bonds issued for original
financings of governmental capital projects for public schools and State
universities and new money financings for Section 501(c)(3) nonprofit
educational entities, such as nonprofit schools and universities that could be
financed with qualified 501(c)(3) bonds.
- Exempt Foreign Pension Funds from the Application of the Foreign
Investment in Real Property Tax Act (FIRPTA). Infrastructure assets can
be attractive investments for long-term investors such as pension funds that
value the long-term, predictable, and stable nature of the cash flows associated
with infrastructure. With U.S. pension funds generally exempt from U.S. tax
upon the disposition of U.S. real property investments, the Administration
proposes to put foreign pension funds on an approximately equal footing: exempting
their gains from the disposition of U.S. real property interests, including
infrastructure and real estate assets, from U.S. tax under FIRPTA.
TAX RELIEF FOR MIDDLE-CLASS FAMILIES
- Make the American Opportunity Tax Credit (AOTC) permanent. Currently
authorized through 2017, the AOTC provides taxpayers a credit of up to $2,500
per eligible student per year for qualified tuition and related expenses paid
for each of the first four years of the student’s post-secondary education. The
Budget proposes to make the AOTC permanent, providing up to $10,000 for a
student in their family over four years in college. The credit is expected to help
13 million families with students pay for higher education in 2014.
- Expand the Earned Income Tax Credit (EITC) to support working families.
The Budget would make permanent enhancements to the EITC for working families
with three or more children and for married couples. These enhancements, which are scheduled to
expires after 2017, are expected to benefit 7 million families in 2014.
- Expand the Child Tax Credit (CTC). The Budget would make permanent an
enhancement to the CTC which increases the amount available to very low-income
working families. In 2014, 11 million
families are expected to benefit from this enhancement to the CTC.
- Increase the Child and Dependent Care Tax Credit. The Budget would increase the amount of tax credit
for families with incomes between $15,000 and $103,000 who pay for child care.
- Provide for automatic enrollment in individual retirement accounts
(IRAs). Only about half of American employees today are covered by a
pension plan at work. This proposal will improve retirement security for
millions of workers by requiring employers with more than 10 employees, who do
not offer a retirement plans, to automatically enroll employees in an IRA. With
an automatic IRA, retirement savings are deducted from each paycheck and
deposited in the worker’s own account. Employers do not make contributions, and
employees can opt out of the program at any time. This proposal would provide $18
billion in tax benefits over the next 10 years.
ASK THE MOST
FORTUNATE TO CONTRIBUTE TO BALANCED, CREDIBLE DEFICIT REDUCTION
- Implement the Buffett Rule by imposing a new “Fair Share Tax.”
The Budget ensures that high-income taxpayers cannot use deductions and low
rates on capital gains and dividends to pay a lower effective rate of tax than
that faced by many middle-income families. The proposal would require
very high-income taxpayers to pay at least 30 percent of their adjusted gross
income in income and payroll tax (with a credit for charitable giving).
This would raise $53 billion over the next ten years.
- Limit certain tax expenditures for the most affluent by capping their
value at 28 percent. The Budget proposes to limit the tax subsidy for
itemized deductions, certain other deductions, and certain income exclusions
for high-income families to 28 percent – the same level that was in place at
the end of the Reagan Administration. It would raise $529 billion over
the next 10 years.
- Restore estate tax parameters to 2009 values, after 2017.
The proposal would make permanent the estate, generation-skipping transfer (GST),
and gift tax parameters as they applied during 2009, after 2017. The top
tax rate would be 45 percent, and the exclusion amount would be $3.5 million
for estate and GST taxes, and $1 million for gift taxes. There would be
no indexing for inflation. This proposal would raise $72 billion over the
next ten years.
- Eliminate the carried interest loophole for hedge fund managers and
other similar investment service providers. The Budget proposes
to change the tax treatment of carried interests in investment partnerships,
which present the greatest opportunity for highly compensated service providers
to be taxed on their labor earnings at capital gains rates, which are lower
than the tax rates most moderate-income Americans pay on their earnings.
Closing this loophole would raise more than $16 billion over the next 10 years.
- Eliminate special depreciation rules for purchases of corporate jets
and other general aviation passenger aircraft. Under current law,
airplanes used in commercial and contract carrying of passengers and freight
generally are depreciated over seven years. Airplanes not used in commercial or
contract carrying of passengers or freight, such as corporate jets, generally
are depreciated over five years. The Budget proposes to increase the
depreciation recovery period for general aviation airplanes that carry
passengers to seven years. Eliminating this benefit would raise $3 billion over
BUSINESS TAX REFORM
The Budget would level the playing field for American
business by implementing the proposals in the President’s Framework for
Business Tax Reform. Several of these
are summarized in the sections below.
These reform proposals include a number of revenue-raising
items that serve to broaden the tax base and ensure that business tax reform
does not add to the long-term budget deficit.
AND INSOURCING JOBS IN AMERICA
- Provide tax incentives for locating jobs and business activity in the
United States and prohibit tax deductions for shipping jobs overseas.
The Budget proposes to create a credit against corporate income tax equal to 20
percent of the expenses paid or incurred in connection with insourcing a U.S.
trade or business. The proposal would disallow deductions for expenses paid or
incurred in connection with outsourcing a U.S. trade or business to reduce
incentives for U.S. companies to move jobs offshore.
- Provide a new “Manufacturing Communities” tax credit. The
Budget proposes to create a new tax credit to encourage investments in
communities affected by military base closures, plant closures, and mass
layoffs. This proposal would provide about $2 billion in credits for qualified
investments approved in each of three years, 2014 through 2016.
- Enhance the research and experimentation (R&E) credit and make it
permanent. The Budget proposes to enhance the R&E tax credit by
increasing the credit rate for the alternative simplified credit from 14
percent to 17 percent and making the credit permanent to encourage innovation
and reward businesses that continue to invest in research projects. Making the
credit permanent would remove uncertainty about whether the R&E credit will
be extended, giving businesses greater confidence to invest in innovation that
creates jobs in the United States. This proposal would provide $99 billion in
benefits over 10 years.
TAX RELIEF TO HELP
SMALL BUSINESS GROW AND HIRE
- Extend increased expensing for small business. Business
taxpayers are allowed to expense up to $500,000 in annual investment
expenditures for qualifying property (including off-the-shelf computer
software) placed in service in taxable years beginning in 2010 through 2013.
The maximum amount that can be expensed is reduced by the amount by which the
taxpayer's cost of qualifying property exceeds $2,000,000. The Budget proposes
to permanently extend these expensing limits.
- Permanently eliminate capital gains tax on investments in qualified
small business stock. The Budget would make permanent the President’s
proposal to completely eliminate the capital gains tax for investors in certain
qualified small businesses. This provision was enacted as part of the Small
Business Jobs Act and was subsequently extended through 2013. Making this
provision permanent and making it easier to use by giving investors a longer
time to roll over qualified investments and making sure that the income is not
subject to the Alternative Minimum Tax would save small business owners $6 billion
over the next 10 years.
- Double the amount of currently deductible start-up expenditures.
Under current law, a taxpayer generally is allowed to elect to deduct up to
$5,000 of start-up expenditures in the year a business begins and to amortize
any remaining costs. For 2010 only, the immediately deductible amount was
doubled, from $5,000 to $10,000 (reduced by the amount by which the cumulative
cost of start-up expenditures exceeds $60,000). The Budget proposes to
permanently increase the immediate deduction amount to $10,000. This would save
entrepreneurs about $3 billion over the next 10 years.
- Expand and simplify the small business health care tax credit.
The Affordable Care Act created a new tax credit, effective beginning in 2010,
that covers up to 35 percent (rising to 50 percent in 2014) of an eligible
employer’s premium contributions towards their employees’ health
insurance. The Budget proposes to expand the tax credit to additional
employers (including by increasing the eligibility cut-off from 25 to 50
workers), change the phase-out formula so firms that appear eligible will
qualify for some credit, and simplify the calculation of the credit (by removing
a requirement that an eligible employer pay a uniform percentage of the premium
for each employee and also eliminating a cap on the credit based on the average
health insurance premium in the employer’s state). This would provide an
additional $10 billion in tax relief to small business owners over the next 10
- Exclude certain assets of small taxpayers from the uniform
capitalization (UNICAP) rules. Under
the UNICAP rules, taxpayers that produce property or acquire property for
resale are required to capitalize direct and indirect costs to the property
produced or acquired. Compliance with this requirement is burdensome for
taxpayers that are not otherwise subject to the rules as producers or resellers
of inventory (i.e., for self-constructed assets). The Budget proposes to
exclude these small business taxpayers from the UNICAP rules, which would relieve
compliance burden for both taxpayers and tax administrators.
TO SHIFT INCOME AND ASSETS OVERSEAS
- Combat transfer pricing abuses. President Obama is committed to
rolling back incentives to shift income and assets overseas. A prime
example is “transfer pricing” abuse – when multinational corporations
effectively transfer intangible assets like copyrights and trademarks to subsidiaries
in low-tax jurisdictions at artificially low prices. Transfer pricing abuse
shifts profits overseas while avoiding the taxes they would pay on a fairly
priced transaction. Under the Budget proposal, excessive profits related
to the offshore use of transferred intangibles would be taxable in the United
States, thus restricting the tax incentive to engage in transfer pricing
abuses. This proposal, along with a related proposal to clarify the
definition of intangible assets, would raise more than $26 billion over the
next 10 years.
- Other reforms to reduce incentives to shift income and assets overseas.
In addition to transfer pricing reform, the Budget includes a broader package
of international tax reforms that have been designed to reduce incentives to
shift income and assets overseas. For example, U.S. businesses that borrow
money and invest it overseas can claim the interest they pay as a business
expense and take an immediate deduction to reduce their U.S. taxes under
current law, even if they pay little or no U.S. taxes on their overseas
investment. The Budget would eliminate this tax advantage for overseas
investment by requiring that the deduction for the interest expense
attributable to overseas investment be delayed, saving $37 billion over the
next 10 years.
- Total Effect. Overall, the Budget’s proposals to reform
international tax rules will raise $157 billion over the next 10 years.
- Increase tobacco taxes and index to inflation. The proposal
would increase the tax on cigarettes from just under $1.01 per pack to about
$1.95 per pack and increase all other excise taxes on tobacco products by
roughly the same proportion beginning in 2014.
Excise tax rates would be increased for inflation annually. The proposal would raise $78 billion over ten
years, which the Administration would use to pay for high-quality early
- Addressing Taxpayer Identity Theft. The Budget makes four separate proposals to
reduce the likelihood of taxpayer identity theft and to increase penalties on
those who engage in it. These initiatives
will help the Internal Revenue Service continue to increase their efforts to
curtail identity theft and provide taxpayers with quality, effective service
while safeguarding taxpayer information.